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周教授CFA金融课程:2021年CFA一二三级系列课程
Carl Allen, CFA, has been assigned the task of documenting some of his company’s asset allocation techniques. After the firm receives accolades in a recent trade magazine article highlighting firms with innovative trading strategies, Allen’s supervisor decides it is time the firm began formally documenting how properly timed allocation shifts can add value to assets under management. Allen decides he will not only document the firm’s specific allocation adjustment strategies, but will also compile a document listing various allocation techniques. Allen decides to begin with input factors such as investor risk tolerance and market conditions and work his way to specific techniques designed to take advantage of various opportunities. His overall plan is to work from theoretical concepts to specific applications. One of the first concepts Allen has to explain is the idea of holding an “optimal” portfolio. In his mind, Allen decides he has to adequately explain the two main factors that will allow an investor the ability to hold an optimal portfolio. Which of the following will dictate the selection of an investor’s optimal portfolio?
A)
The tangential intersection between an investor's indifference curve and the efficient frontier.
B)
The global minimum variance portfolio.
C)
Any intersection between an investor's indifference curve and the investment opportunity set.



An optimal portfolio is any set of assets that maximizes an investor’s utility, which is dictated by his indifference curve, with those assets yielding the highest returns at given risk levels, which are dictated by the efficient frontier. The tangential intersection of indifference curves with the efficient frontier dictates an investor’s optimal portfolio.

Allen has determined there are differential postures an asset manager can take, depending upon whether market conditions are trending up, trending down, or staying relatively level with significant volatility. Which rebalancing strategy provides the greatest benefit when markets are trending up or down with little oscillation?
A)
Constant mix strategy.
B)
Buy and hold strategy.
C)
Constant proportion portfolio insurance strategy.



When a market is either trending up or down with few oscillations, a constant proportion portfolio insurance (CPPI) strategy will outperform other strategies. A CPPI strategy will provide increasing exposure to risky assets when asset values are increasing. An investor will essentially hold an increasing amount of risky assets when their value is increasing. On the other hand, in markets with a declining trend, investors following a CPPI strategy will be selling risky assets faster than others when markets are declining.

While conducting his research, Allen determines that some dynamic strategies can use a mathematical formula that can easily determine the amount of assets one invests in equities. Specifically, one formula Allen discovers is:
$ Invested in stock = m x (assets – floor)
where:

m

=
stock investment multiplier

assets

=
total assets held in the portfolio (TA)

floor

=
the minimum allowable portfolio value (F) (zero risk level)

assets - floor

=
cushion or funds that can be put at risk

Realizing that his firm’s trading strategies were highlighted in the recent edition of a trade magazine due in part to some timely exposure increases in trending markets, Allen begins to document how his firm applies this particular mathematical formula. Since Allen’s firm’s performance seems exemplary in a trending market, which value of “m” was probably chosen?
A)
Equal to 1.
B)
Less than 1.
C)
Greater than 1.



The implication is that Allen’s firm made some important choices in a trending market. This indicates a constant proportion portfolio insurance (CPPI) allocation strategy, which requires that an “m” greater than 1 be chosen. Apparently, Allen’s firm was able to increase exposure to equities quickly enough to take advantage of a trending market and probably was able to decrease exposures quickly enough before markets may have trended downward.

TOP

Concave strategies:
A)
include constant proportion portfolio insurance strategies (CPPI).
B)
buy stocks as they fall in price.
C)
sell stocks as they fall in price.



Concave strategies buy stocks as they fall in price and do not have much downside protection. Constant mix strategies, not CPPI, are examples of concave strategies.

TOP

Which of the following statements regarding rebalancing strategies that have convex payoff diagrams (y-axis = portfolio value, x-axis = stock market value) is CORRECT? Convex rebalancing strategies:
A)
include the constant mix strategy.
B)
sell stocks as prices fall and buy stocks as prices rise.
C)
do well in flat, but oscillating, markets.



The constant mix strategy has a concave payoff diagram. Because convex strategies sell stocks as prices fall and buy as prices rise, they perform poorly in flat, oscillating markets—selling on weakness only to see the market rebound, and buying on strength only to see the market fall.

TOP

Constant mix strategy:
A)
requires purchase of a stock as the stock value rises.
B)
is preferable to a buy and hold strategy when the market reverses direction.
C)
requires purchase of bonds as stocks fall in value.



In a constant mix strategy an investor will hold stocks at all wealth levels. A constant mix strategy requires the purchase of stocks as they fall and the selling of stocks as they rise, capitalizing on market reversals. A constant mix strategy will generally underperform a comparable buy-and-hold strategy when there are no market reversals.

TOP

Which of the following asset allocation strategies takes a contrarian view of investing?
A)
Constant mix.
B)
Constant proportion portfolio insurance (CPPI).
C)
Buy and hold.



The constant mix strategy takes a contrarian view of investing in order to maintain a constant asset allocation regardless of wealth levels. Buy and hold strategies passively assume that risk tolerance is directly related to wealth levels. The CPPI is a momentum-based strategy that aggressively increases exposure to risky assets in a rising market.

TOP

Which of the following strategies is most appropriate for an investor whose risk tolerance drops to zero when the value of the portfolio drops below a floor value?
A)
Constant proportion portfolio insurance.
B)
Buy and hold.
C)
Both of these responses are correct.



In each of these strategies, risk tolerance is zero when the value of assets drops below the floor. Under buy and hold, the floor value is the original amount invested in T-bills.

TOP

Which of the following strategies is most likely to outperform if a stock market reversal is NOT expected to occur?
A)
Buy and hold.
B)
Constant proportion.
C)
Constant mix.



Constant proportion strategies (CPPI) outperform when stock market reversals are not expected because as the market increases in value the CPPI investor will invest in a higher proportion of stocks in their portfolio. The buy and hold investor will do nothing and the proportion of stocks in their portfolio will increase but not as high as the actively managed CPPI portfolio. The constant mix investor will have to shift out of stocks as the market increases to maintain a constant proportion of stocks as the market fluctuates. If the market trends downward without reversing the CPPI investor will be the first one out of stocks as the market continues its downward slide.

TOP

Which of the following strategies is most likely to outperform if stock market reversals are expected to occur?
A)
Buy and hold.
B)
Constant proportion.
C)
Constant mix.



Constant mix strategies outperform during stock market reversals.

TOP

Which of the following asset allocation strategies passively assumes that risk tolerance is directly related to wealth levels?
A)
Constant mix.
B)
Constant proportion portfolio insurance (CPPI).
C)
Buy and hold.



This is the definition of a buy and hold strategy. Constant mix strategies take a contrarian view of investing in order to maintain a constant asset allocation regardless of wealth levels. CPPI is a momentum-based strategy that aggressively increases exposure to risky assets in a rising market.

TOP

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上一主题:Portfolio Management and Wealth Planning【Session17 - Reading 41】
下一主题:Portfolio Management and Wealth Planning【Session16 - Reading 39】