A portfolio consists of three index funds: an equity index, a bond index, and an international index. The portfolio manager changes the weights periodically according to forecasts for each sector. This is an example of ________.

Question

Quizplus · Accepted Answer

The portfolio manager is actively making decisions about the allocation of assets (i.e. choosing weights for each index) but is passively selecting securities within each index. Therefore, this is an example of active asset allocation with passive security selection.

A Portfolio Consists of Three Index Funds: an Equity Index