A portfolio manager who believes equity securities are overvalued in the short term reduces the weight of equities in her portfolio to 35% from its longer-term target weight of 40%. This decision is best described as an example of:
a. rebalancing.
b. strategic asset allocation.
c, tactical asset allocation.
The answer is tactical asset allocation. I am confused about how to differentiate between rebalancing and tactical asset allocation. Since rebalancing is periodically adjusting back to tactical allocation…