Assume that the following (annual) returns occurred for various asset classes in 2019 and 2020. 2019...

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Assume that the following (annual) returns occurred for various asset classes in 2019 and 2020. 2019 2020 US 3-month T-Bills 3% 3% S&P 500 index 0% 7% 1) DBAM are terrific market timers. They put $100 in the beginning of 2019 in the asset class which had the higher return in 2019 and then at the beginning of 2020 rolled the proceeds in the asset class which had the higher return in 2020. How much would they have in the end of 2020? 2) Ryan is a terrible market timer. He put $100 in the beginning of 2019 in the asset class which had the lower return in 2019 and then at the beginning of 2020 rolled the proceeds in the asset class which had the lower return in 2020. How much would he have in the end of 2020? 3) If $100 is put in a buy-and hold T-Bill portfolio for 2 years in the beginning of 2019, how much would it be worth in the end of 2020? 4) If $100 is put in a buy-and hold S&P index portfolio for 2 years in the beginning of 2019, how much would it be worth in the end of 2020? 5) Given your four answers above, and given that you have to commit to a strategy in the beginning of 2019 - the buy-and hold strategy where you have to decide between asset classes at the beginning of 2019 OR the market timing strategy where you have to decide between asset classes at the beginning of every year - which strategy is riskier? Why? Assume that the following (annual) returns occurred for various asset classes in 2019 and 2020. 2019 2020 US 3-month T-Bills 3% 3% S&P 500 index 0% 7% 1) DBAM are terrific market timers. They put $100 in the beginning of 2019 in the asset class which had the higher return in 2019 and then at the beginning of 2020 rolled the proceeds in the asset class which had the higher return in 2020. How much would they have in the end of 2020? 2) Ryan is a terrible market timer. He put $100 in the beginning of 2019 in the asset class which had the lower return in 2019 and then at the beginning of 2020 rolled the proceeds in the asset class which had the lower return in 2020. How much would he have in the end of 2020? 3) If $100 is put in a buy-and hold T-Bill portfolio for 2 years in the beginning of 2019, how much would it be worth in the end of 2020? 4) If $100 is put in a buy-and hold S&P index portfolio for 2 years in the beginning of 2019, how much would it be worth in the end of 2020? 5) Given your four answers above, and given that you have to commit to a strategy in the beginning of 2019 - the buy-and hold strategy where you have to decide between asset classes at the beginning of 2019 OR the market timing strategy where you have to decide between asset classes at the beginning of every year - which strategy is riskier? Why?

Answer rating: 100% (QA)

1 For DBAM they put 100 in the asset class with the higher return in 2019 which is the SP 500 index 7 In 2020 they rolled the proceeds into the asset ... View the full answer