CFA Practice Question

There are 221 practice questions for this study session.

CFA Practice Question

Which statement is false about tactical asset allocation?

A. It assumes that an investor's risk tolerance is relatively stable over the long run and is flexible in the short run.
B. Tactical asset allocation is often considered a market timing strategy.
C. There is a consensus concerning its effectiveness in improving portfolio performance.
Correct Answer: C

While there are many adherents to tactical asset allocation, there is no strong consensus concerning its effectiveness in improving portfolio performance. Empirical studies suggest that it is possible to forecast asset class returns over long time periods, but that it becomes more difficult as the time period shortens. Tactical asset allocation can add value only if it is driven by effective forecasting of the relative performance of asset classes over a fairly short time horizon.

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