Concentration level

问题如下：

Based on its HHI, the initial US large-cap benchmark most likely has:

选项：

A.

a concentration level of 4.29.

B.

an effective number of stocks of approximately 35.

C.

individual stocks held in approximately equal weights.

解释：

B is correct. The HHI measures stock concentration risk in a portfolio, calculated as the sum of the constituent weightings squared:

$HHI={\textstyle\sum_{i=1}^n}w_i^2$

Using the HHI, one can estimate the effective number of stocks, held in equal weights, that would mimic the concentration level of the respective index. The effective number of stocks for a portfolio is calculated as the reciprocal of the HHI. The HHI is 0.0286; the reciprocal (1/0.0286) is 34.97.

Therefore, the effective number of stocks to mimic the US large-cap benchmark is approximately 35.