Michael Severino and Jeffery Chalmers are portfolio managers for Parthenon Asset Advisors. Severino and Chalmers both believe that having defined criteria for rebalancing a portfolio provides discipline in their portfolio management process, but they have different opinions on how to go about it. Severino states, “With calendar rebalancing, a portfolio could spend the majority of its existence looking extremely different from the target asset allocation, but trades made to rebalance the portfolio may only have a minor impact on how the portfolio is allocated.” Chalmers replies, “If we use percentage-of-portfolio rebalancing, there may never be a trade placed to rebalance our client portfolios.” With regard to their statements about rebalancing methods:
A) Severino is incorrect; Chalmers is correct. B) Severino is correct; Chalmers is correct. C) Severino is incorrect; Chalmers is incorrect.