CPPI and Reducing transaction cost

CFA Level III
#1

If a market is erratic but general uptrend, which strategy performs best? CPPI or Constant mix?

The answer in the book said constant mix, but I thought if it was upward trending CPPI would be better, where constant mix is best in flat but oscillating markets. Any thoughts?

Also if you goal is to minimize transactions cost and the need to monitor the portfolio which approach is best?

A. % of Portfolio

B. Calendar Rebalance

C. Mix

The answer was mix. I unerstand from a monitor stand point that calendar is better, but how is % of portfolio better? Won’t the cost be more than calendar? Could this be a mistake?

#2

when market is erractic CP could underperform CM even with up trend, it might even underperform BH if there are high transaction costs. So the statement that CP will outperform CM was false. Volatility will always mess with CP.

Your second question, I don’t think its a mistake… what i understood when I wrote my answer was that the “combination” was calendar rebalancing with corridor or tolerance bands… so if its quarter end and they are ok with the % within the bands they wouldn’t change it… reducing amt of transactions.