Differences in average portfolio allocations to equities across countires are least likely a result of A. different historical attitudes toward financial risk B. differences in historical inflation. C. availability of equities D. differences in government pension programs. To me, all of these appear to be reasons for differences in portfolio allocations across countries. What are other people’s thoughts?
Is b correct ans. allocation may depend on expected future inflation not historical inflation
B makes sense to me too
I am saying C, Remember it asks which is LEAST likely…please post the answer.
The average they are talking about is not only about pension programs portfolios, but rather all portfolios. So, what if government pension programs are different? That’s the least likely factor affecting the average allocation to equities, IMHO. Answer is D.
Answer is C Explanation: Differences in attitudes toward financial risk cause more risk averse investors, such as those in Germany, to hold less equities on average. Investors in countries with high historical inflation tend to invest more in equities on average. The better the government pension system, the less the country’s citizens tend to invest in equities. Availability of equities is not a likely cause of differences in average allocations to equities. I still contend that all of these answers are valid reasons for portfolio allocation differences Consider investors in emerging markets who are less risk averse. Inflation is higher, and Govt pension system is non-existence. What hinders them ? Availability to invest in equities as exchanges are less sophisticated, less public co’s, larger min investments…
Right but you don’t choose to not invest in equities because your choices are limited. In your 401k if you have 2 equity mutual funds and 50 fixed income funds, you may still invest in the equity funds because you know you want the growth prospect. Obviously most people want more equities available, but it does not determine how much you would put in those you do have access to. I agree the question is not the greatest, but if you can look at it thru simple eyes (easy for me as I am not that bright), without overanalyzing each answer(although you could find issues with each answer), you will agree with C. Good question!