Index-Based Equity Strategies

Free CFA Level III: Portfolio Management lesson in Index-Based Equity Strategies. 23 min read, ~3,424 words.

Cap-weighted indexing is the only macro-consistent neutral portfolio; every alternative weighting (equal, fundamental, factor) is an active bet against it. Factor-based strategies are rules-based but active relative to the market; expect 2-6% tracking error, so booking them as passive misclassifies that risk as zero. Three construction techniques: full replication for...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• passive equity investing
• index construction
• portfolio construction

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