last photo can help you to find the ans

Q18. Given what has been learned in this chapter, what alpha & beta characteristics of a portfolio would an investor most likely seek, when deciding between two comparable equity portfolios, relative the different stages of a market cycle (See Chapter 16). Indicate: relatively higher or relatively lower for each. Contraction Phase Alpha: Beta: Stock Market Trough Alpha: Beta: Recovery and Expansion Alpha: Beta: Equity Cycle Peak Alpha: Beta: Table 16.3 | General Investment Strategies Equity Cycle Business Cycle Contraction phase End of expansion through peak, into the contraction phase Market Conditions Recession conditions are apparent. Interest rates are high Stock market trough Late contraction phase to end of contraction phase The bottom of the business cycle has not been reached, but the stock market has begun to advance because of falling interest rates and the expectations of an economic recovery Strategies Lengthen term of bond holdings by selling short-term bonds and buying mid-term to long-term bands Try to maintain same yield (income) Avoid or reduce stock exposure Sell long-term bands because they rallied ahead of stocks in response to falling interest rates Common stocks usually rally dramatically; often, the largest gains occur in the higher-risk cyclical industries Increase common stock exposure, given that sustained economic growth generally allows stocks to do well Recovery and expansion End of trough, into recovery and expansion phase Equity cycle peak Late expansion into peak phase The bottom of the business cycle has been reached Economy starts growing again, unemployment is falling and businesses are making profits. Economic growth has been Sustained, however, this has also led to higher interest rates and the Bank of Canada may be tightening its monetary policy. Short- term interest rates tend to be higher than long-term rates (i.e., the yield curve is inverted) Reduce common stocks exposure and invest in short- term interest-bearing paper The equity cycle peak is generally followed by the contraction phase