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Some index manager adjust the float continuously w/ high costs. Other
manager use Band Adjustment, or thy create ranges that capture the true
free float. is the float stays inside the bank they don't rebalance.
Breadth - Measures Coverate % of all firms included in an
indexInvestabiltiy - Liquidity Measure - More Liquidity is betterManny
international small caps are less liquid and some LCs are closely heald
Using Corp Funds for personal use - self dealingInfo manipulation -
misleading financial infopursuit of monopoly of power.Opportunistic
exploitation of suppliers and distributorsSubstandard working
conditionsEnvironmental degradationBribery/corruption
When an EM Country becomes Large (Big Fish, Small Pond)It can cause
upward biased results.If moved to DM country list (Small Fish, Big
Pond)it can be beneficial since the stock is more readily available.
increases inflows of international $ and can spur development.
Add/Drop of securitiesAdding a stock it generates upward price pressure
Not All of a firms shares are available Some companies own shares of
other companies, this could create double counting in an index.To Solve -
Use Free FloatOnly the portion of the firms shares that are available
for purchase.
People have fundamental rights, managers should have moral compass
1. Identify Stakeholders2. Identify their critical interests or
desires3. Identify their demands of the company4. Prioritize5. Provide a
business strategy for critical demands.
Corp Gover that:-Affect the behavior of agents by setting goals and
principles of behavior.-reduce asymmetric info-Remove agents that
misbehave.
Internal - Stockholders, employees, managers, boardExternal -
Customers, suppliers, creditors,unions, gov'ts. Conflicts - Stakeholders
compete for priority.
When a money manger matches buyers and sellers w/o a broker or transaction cost.
The Group receiving power has asymmetric info advantage over
principal. PAR issues happen when agent uses advantage to their best
interest. -Principals don't always know how to detect issues-Temptation
for board members to align w/ executives-CEOs over expand at the expense
of stockholders to increase their comp.
Just distribution of economic output. Justice is met when acceptable
under a veil of ignorance. If you agree the rules are fair, then the
results are fair. unequal division must still benefit the least
advantaged member of society.
Addressed social responsibility only by staying with the "rules of the
game" through " Open and fair competition w/o deception or
fraud"-other's argue that his view is flawed when rules are poorly
defined, ethics require more than profits.
Produce the highest good for the largest number of people. Flaws -
Difficult to measure, greater good could exploit smaller subgroups
Objectivity - Uses fixed Criteria or requirementsTransparency - When
that criteria is disclosed to managers.The more O & T The more
efficient trading.Judgment - Is subjective measures chosen by a
committee. S&P is an example.
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