hinsafdar

Assignment of asset class weights for a portfolio based on long-term capital market expectations is called:

A) strategic asset allocation.

B) portfolio optimization.

C) tactical asset allocation.

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Strategic asset allocation is the assignment of weights to different asset classes based on long-term capital market expectations. Tactical asset allocation is based on short-term capital market expectations.

hinsafdar

Strategic asset allocation is based upon:

A) long-term capital market expectations and risk/return preferences of the investor.

B) short-term capital market expectations and the investment policy statement.

C) long-term capital market expectations and the investment policy statement.

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Strategic asset allocation is based on long-term capital market expectations (which forms the basis for the generation of the efficient frontier) and the investment policy statement (IPS) of the investor. The IPS includes not only the risk/return objectives of the investor but also the investor’s constraints.

hinsafdar

Which of the following statements regarding the strategic asset allocation process is least accurate?

A) The strategic asset allocation must be rebalanced periodically for changes in the valuation of the various asset classes in the portfolio.

B) The strategic asset allocation review is typically performed once per year.

C) Strategic asset allocation, similar to tactical asset allocation, employs a short-run capital market projection.

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Strategic asset allocation employs a long-term capital market projection.