Practice question #3, identify fund style per regression. With the following facts, why isn’t the fund categorized as “market oriented” instead of “modest value” style? Does that mean when we evaluate, we need to put more weight on the financial measurements than section allocation?
P/E, P/B, and EPS growth are all slightly lower than the market benchmark
dividend yield is slightly highe
finance and energy are underweight. health care and information technology are modestly overweight
I would say place more weight on the financial metrics than on the relative sector allocations. These ratios represent the portfolio as a whole versus the benchmark, whereas sector exposures can offset each other (in terms of value/growth). However, if the active sector weightings to typical value or growth sectors were very large, it is worth considering the effect these might have at the total portoflio level. Also, keep in mind that small diiffernces in ratios can be quite meaningful with respect to value/growth biases