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LOS e: Contrast calendar rebalancing to percentage-of-portfolio rebalancing.
Q1. Tyrone Wilkins and Deborah Ortiz are portfolio managers for Meabon Asset Management. Both Wilkins and Ortiz believe that rebalancing is an important part of portfolio management, but are unsure which rebalancing method would be best for their respective clients. Wilkins wants to maintain his client’s exposure to systematic risk factors, but does not want to spend his time constantly monitoring his client’s portfolio. Ortiz is most concerned that two or more asset classes in the portfolio could stray too far from the portfolio’s target allocation. Given their concerns, which rebalancing method would be best for Wilkins and Ortiz respectively?
Rebalancing Method Rebalancing Method
for Wilkins for Ortiz
A) Percentage-of-Portfolio Monte Carlo Portfolio
B) Calendar Percentage-of-Portfolio
C) Percentage-of-Portfolio Calendar
Q2. 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 incorrect; Chalmers is incorrect.
C) Severino is correct; Chalmers is correct.
Q3. Jennifer Engle, CFA, Chairman of Engle Capital Management wants to implement a defined rebalancing process for all of the portfolios managed by her firm. Engle is aware that calendar rebalancing or percentage-of-portfolio rebalancing are the two primary methods of rebalancing a portfolio. Engle asks Michael Buening, an analyst, to prepare a report on the best rebalancing method for specific criteria. Specifically, Engle wants to know which method would be best under three different criteria: (1) time spent on the rebalancing process, (2) expense of trading, and (3) consistency of portfolio asset allocation. Which of the following correctly lists the best rebalancing method for each of Engle’s criteria?
Time Spent on Process Expense of Trading Consistency of Allocation
A) Calendar rebalancing Percentage-of-portfolio Calendar rebalancing
B) Calendar rebalancing Unknown Percentage-of-portfolio
C) Unknown Calendar rebalancing Percentage-of-portfolio | 
发表于 2009-4-10 12:56
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