A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.
A) factor
B) market
C) index
D) factor and market
E) factor, market, and index

Question

Quizplus · Accepted Answer

A factor portfolio is specifically designed to have a beta of 1 with respect to one factor, meaning it is fully sensitive to changes in that factor, and a beta of 0 with respect to all other factors, indicating no sensitivity to movements in those factors. This allows investors to isolate and gain exposure to specific risk factors.

A _________ Portfolio Is a Well-Diversified Portfolio Constructed to Have