Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An investor wishes to implement sector rotation investment strategy which requires the analyst to forecast which sector is likely to perform better than other sectors

image text in transcribed
An investor wishes to implement sector rotation investment strategy which requires the analyst to forecast which sector is likely to perform better than other sectors over the next investment horizon, and then increase allocation to that sector in comparison to the market index. This investment strategy is designed to beat the market index. Which of the following statement is incorrect regarding the sector rotation investment management process? If the signal for the Sector Rotation Strategy is ambiguous, then all sectors must be allocated in the same weight as the market. The signal for the strategy may be based on the shape of the yield curve. A positive twist in the yield curve will signal that investor should allocate more capital to the cyclical sectors. The investment philosophy of Sector Rotation strategy is that industry sectors can get mis-priced as investors can become too optimistic or pessimistic regarding the prospects of a sector. The signal for the Sector Rotation Strategy will be captured using the largest equities from each sector since the largest equities are most liquid. If the signal for the Sector Rotation strategy suggests that a certain sector is undervalued, then the investor should allocate more than the market's allocation to that sector. An investor wishes to implement sector rotation investment strategy which requires the analyst to forecast which sector is likely to perform better than other sectors over the next investment horizon, and then increase allocation to that sector in comparison to the market index. This investment strategy is designed to beat the market index. Which of the following statement is incorrect regarding the sector rotation investment management process? If the signal for the Sector Rotation Strategy is ambiguous, then all sectors must be allocated in the same weight as the market. The signal for the strategy may be based on the shape of the yield curve. A positive twist in the yield curve will signal that investor should allocate more capital to the cyclical sectors. The investment philosophy of Sector Rotation strategy is that industry sectors can get mis-priced as investors can become too optimistic or pessimistic regarding the prospects of a sector. The signal for the Sector Rotation Strategy will be captured using the largest equities from each sector since the largest equities are most liquid. If the signal for the Sector Rotation strategy suggests that a certain sector is undervalued, then the investor should allocate more than the market's allocation to that sector

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance Principles And Practice

Authors: Denzil Watson, Tony Head

1st Edition

0273630083, 978-0273630081

More Books

Students also viewed these Finance questions

Question

What are the HR forecasting techniques?

Answered: 1 week ago

Question

Define succession planning. Why is it important?

Answered: 1 week ago

Question

Distinguish between forecasting HR requirements and availability.

Answered: 1 week ago