CFA 2026 Level II Vignettes Portfolio Strategy Performance Evaluation Free Quiz 2

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CFA 2026 Level II Vignettes Portfolio Strategy Performance Evaluation Free Quiz 2

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CFA 2026 Level II Vignettes Portfolio Strategy Performance Evaluation Free Quiz 2

Practice CFA 2026 Level II Vignettes Portfolio Strategy MCQs from Performance Evaluation. Get instant results with Explanation.

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1. Vignette 3: Performance Evaluation - Case Study: A portfolio manager analyzes the sources of return relative to a benchmark. What are the components of performance attribution?

A. Performance attribution only measures total returnB. Performance attribution is the same as risk attributionC. Performance attribution has only one componentD. Performance attribution decomposes return into allocation, selection, and interaction effects

2. What is the allocation effect in performance attribution?

A. Allocation effect = Σ (w_p,i - w_b,i) × R_b,iB. Allocation effect = Σ (w_p,i - w_b,i) × R_p,iC. Allocation effect = Σ w_b,i × (R_p,i - R_b,i)D. Allocation effect = Σ w_p,i × (R_p,i - R_b,i)

3. What is the selection effect in performance attribution?

A. Selection effect = Σ (w_p,i - w_b,i) × R_b,iB. Selection effect = Σ w_b,i × (R_p,i - R_b,i)C. Selection effect = Σ w_p,i × (R_p,i - R_b,i)D. Selection effect = Σ (w_p,i - w_b,i) × (R_p,i - R_b,i)

4. What is the interaction effect in performance attribution?

A. Interaction effect = Σ (w_p,i - w_b,i) × R_b,iB. Interaction effect = Σ w_b,i × (R_p,i - R_b,i)C. Interaction effect = Σ (w_p,i - w_b,i) × (R_p,i - R_b,i)D. Interaction effect = Σ w_p,i × (R_p,i - R_b,i)

5. What is the purpose and limitation of attribution analysis?

A. Attribution analysis is not useful for improving investment decisionsB. Attribution analysis is always accurateC. Attribution analysis is only for equity portfoliosD. Attribution analysis helps identify skill and areas for improvement but has limitations

General10 MCQs

6. Vignette 4: Performance Evaluation - Case Study: A manager is selecting a benchmark for a portfolio. What are the characteristics of a good benchmark?

A. Any index can be a good benchmarkB. A benchmark should be chosen after the portfolio is constructedC. A good benchmark is appropriate, investable, transparent, and specified in advanceD. Benchmark characteristics are not important

7. What is a customized benchmark and when is it used?

A. Custom benchmarks can be tailored to the portfolio's strategy and constraintsB. Custom benchmarks are never usedC. Custom benchmarks are the same as generic indicesD. Custom benchmarks are not recommended

8. When should the benchmark be selected?

A. The benchmark can be chosen after the portfolio is constructedB. The benchmark can be changed at any time without consequencesC. The benchmark is not important for performance evaluationD. The benchmark should be selected before portfolio construction

9. What are the limitations of peer group benchmarks?

A. Peer group benchmarks are always reliableB. Peer group benchmarks have limitations, including survivorship biasC. Peer group benchmarks are the best choiceD. Peer group benchmarks are not used

10. What is tracking error and what does it indicate?

A. Tracking error is the average excess returnB. Tracking error is the same as volatilityC. Tracking error is the standard deviation of the excess returns (portfolio - benchmark)D. Tracking error is not a measure of active risk

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Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

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Merit Formula: -

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