OK, would it be fair to state that one situation in which a B & H strategy would outperform all the other straetgies is in a heavily oscillating upward market, due to the fact that CPPI would incur so many transaction costs. For instance, an emerging market portfolio. I would obviously state that for the most part B & H performs somewhere in between CPPI and CM…but wouldn’t this present a case in which B & H is better. I know this may not fit into CFAI’s rigid academic views… Had this on a pratice exam and its been bugging me. Thx
CFA_Halifax Wrote: ------------------------------------------------------- > OK, would it be fair to state that one situation > in which a B & H strategy would outperform all the > other straetgies is in a heavily oscillating > upward market, due to the fact that CPPI would > incur so many transaction costs. For instance, an > emerging market portfolio. > > I would obviously state that for the most part B > & H performs somewhere in between CPPI and > CM…but wouldn’t this present a case in which B & > H is better. I know this may not fit into CFAI’s > rigid academic views… > > Had this on a pratice exam and its been bugging > me. > > Thx no oscillation for B and h, it just performs less better than CPPI 'cos it does not increase its equity position in multiple like cppi does. remember cppi has a multiple of >1.0
If it is oscillating but flat, go with const mix. just dont try to overanalyse.
The Edge Wrote: ------------------------------------------------------- > CFA_Halifax Wrote: > -------------------------------------------------- > ----- > > OK, would it be fair to state that one > situation > > in which a B & H strategy would outperform all > the > > other straetgies is in a heavily oscillating > > upward market, due to the fact that CPPI would > > incur so many transaction costs. For instance, > an > > emerging market portfolio. > > > > I would obviously state that for the most part > B > > & H performs somewhere in between CPPI and > > CM…but wouldn’t this present a case in which B > & > > H is better. I know this may not fit into > CFAI’s > > rigid academic views… > > > > Had this on a pratice exam and its been > bugging > > me. > > > > Thx > > no oscillation for B and h, it just performs less > better than CPPI 'cos it does not increase its > equity position in multiple like cppi does. > remember cppi has a multiple of >1.0 yeah, I know what you mean, but because CPPI is rebalancing so often (due to oscillation), wouldn’t it actually underperform. Doesn’t really matter I guess, just need to know that B &H is usually in between. I guess I should overcomplicate things. Anyone think we’ll actually need to know the forumla for a CPPI rebalance? I see this is more of a morning question with just writing myself…