QUESTIONS 115 THROUGH 120 RELATE TO PORTFOLIO MANAGEMENT.

120. A portfolio manager decides to temporarily invest more of a portfolio in equities than the

investment policy statement prescribes, because he expects equities will generate a higher

return than other asset classes. This decision is most likely an example of:

A. rebalancing.

B. tactical asset allocation.

C. strategic asset allocation.

Answer = B

Basics of Portfolio Planning and Construction,” Alistair Byrne, CFA, and Frank E. Smudde, CFA

2011 Modular Level I, Vol. 4, pp. 450, 467, 477

Study Session 12-54-g

Discuss the principles of portfolio construction and the role of asset allocation in relation to the

IPS.

B is correct. Tactical asset allocation is the decision to deliberately deviate from the policy

exposures to systematic risk factors with the intent to add value based on forecasts of the near-

term returns of those asset classes.

By accessing this mock exam, you agree to the following terms of use: This mock exam is provided to currently-

registered CFA candidates. Candidates may view and print the exam for personal exam preparation only. The

following activities are strictly prohibited and may result in disciplinary and/or legal action: accessing or permitting

access by anyone other than currently-registered CFA candidates; copying, posting to any website, emailing,

distributing and/or reprinting the mock exam for any purpose.