I thought the answer should be B, but it’s A?
Justine Robinson invests in risk–bearing securities in a constant proportion to the value of his portfolio. Robinson’s portfolio strategy will MOST LIKELY benefit from a market that is:
Flat but oscillating.
Rising consistently.
Falling consistently.
You are right it should be A
Should be A or B? I thought it should be B
Think about what portfolio style is most correct in each scenario.
That’s not to say that constant proportion doesn’t work in more than one case, but it’s optimal in the scenario when the market oscillates and you buy low and sell high.
The question is so poorly worded…
Flat but oscillating in other words means mean reverting
So when market rises in constant proportion you would sell high and then market would fall so loss would be lesser and when market falls we buy just before it is going to rise so more gain .
Answer A
It’s a lousy question.
A constant mix strategy will most likely benefit in a flat, oscillating market.
A constant mix strategy will most likely benefit in a constantly rising market.
It’s a lousy question.