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标题: PortFolio Mgmt Mock Qn [打印本页]

作者: koba    时间: 2013-4-1 12:44     标题: PortFolio Mgmt Mock Qn

Which of the following statements is least likely to be an assumption about
investor behaviour underlying the Markowitz model?
A. Investors maximize oneperiod expected return
B. Investors base their decisions solely on expected return and risk
C. Investors have utility curves that are a function of expected returns and
variance.
Answer: A
“Managing Investment Portfolio: A Dynamic Process” John Maginn, Donald
Tuttle, Denis McLeavy, Jerald Pinto
2009 Modular Level I, Vol 4, p 225226
Study Session 1250 b;
The candidate should be able to list the assumptions about investor behaviour
underlying the Markowitz model;
Investors maximize oneperiod expected utility, and their utility curves demonstrate
diminishing marginal utility of wealth.
Qn: Slightly confused… just want to check if I am alone. After reading closely ..think I know where I am mistaken but…
作者: Analyze_This    时间: 2013-4-1 12:44

thanks for posting, you’re not alone as I had this incorrect as well and is on the “REVIEW” pile…
作者: skycfa    时间: 2013-4-1 12:44

Guys!
You cant aim to maximize return, because the more risk you are willing to take, the more return you can attain. ‘A ‘is definitely not true; hence it is the right answer. Utility is what investors are after, which varies with each investor. Everyone has different risk return tradeoffs (Indifference curves)
作者: WarrenB1    时间: 2013-4-1 12:44

The assumption that they have the same time horizon is part of capital markets theory.
作者: ryanlb    时间: 2013-4-1 12:44

For what its worth, (and I’m sure this is not a unique strategy, but does help with these type of questions) what sometimes helps me on the tricky questions is just eliminating the ones that are true and the one left over is, by default, correct. In this case, B & C are correct assumptions, so A must be the answer. Obviously it helps if you understand why each option is the correct/incorrect choice, but this my help to get through tough questions.




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