CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing
A portfolio manager divides a bond universe into 4 groups by credit rating and then draws a random sample from each group in proportion to the group's share of the universe. This approach is best described as:
This is stratified random sampling. The population is split into rating-based strata and random samples are drawn from every stratum in proportion to its size, which guarantees each rating group is represented. Cluster sampling instead selects whole groups and studies only those chosen.
- ACluster sampling
- BStratified random samplingCorrect
- CSystematic sampling
Explanation
Dividing the population into subgroups (strata) and drawing random samples from each in proportion to its size is stratified random sampling. Cluster sampling would select entire subgroups at random instead of sampling within every one.
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