2011 Schweser Mock - Morning Question 5 morning, correct, question, 2011

Iginla2010

[Before I start, I just want to say I'm totally burnt out from studying, so the answer to this is likely very obvious. I just need one of you guys to help me out here!!!]

For question 5 in the morning part of the 2011 Schweser Mock, the market is trending downwards. (Determined using S&P 500 figures given.) So how is the first part of 5C correct? Doesn't a CPPI strategy outperform all in a trending market?

AM: 63%
PM: 67%
Taking the next 12 days off to study. Hope I can punch in a win on the 4th...

lcw77

Good point.

But if you look at the portfolio values of those two firms, the one which follows Constant Mix strategy performed better.

I guess the market was almost flat.

justin88

It would only seem to be "trending" downwards if you were looking at te first and last data points. Taking all of them into consideration, it is not. Down 15%, up 10%, down 13%.


I think it appears to be trending down as it starts at 1000 (in the table) and ends at 810. However, in the initial paragraph, it says that the index went from 875 to 1000 in the first quarter...

Darien

I guess they're calling this a "flat but oscillating" market. Good to know. I missed the comment before the table and just used the first and last numbers - will be sure to slow down during the exam.

Thanks for all of your help, jmac01 and Vegas!!!!

mcmc

flat but oscillating would be the one where the prices keep moving up / down, right.
so CM > B&H > CPPI?

CP

Analyze_This

Schweser actually really helped on these just drawing the concave or convex.