Question: This question requires you to compare two downside risk measures for a quarterly rebalanced portfolio and a drift portfolio with the same Strategic Asset Allocation

This question requires you to compare two downside risk measures for a quarterly rebalanced portfolio and a drift portfolio with the same Strategic Asset Allocation (SAA) of 60:20:20 US:EAFE:EM. Calculate the VaR (90%) and the Probability of Loss (returns below 0%) per quarter of both portfolios. Which of the following statements is incorrect? Group of answer choices

The Drift portfolio has a worse VaR (@ 90%)

The process of rebalancing incurs transaction costs every quarter

The Drift portfolio has a higher probability of Loss

Drift portfolio's Strategic Asset Allocation (SAA) will "drift" with market moves and may not remain close or similar to the initial SAA

Quarterly rebalanced portfolios will always be brought back to the initial SAA

Quarter	EM	EAFE	US	Portfolio	Portfolio return
1	-0.64	4.16	7.67	5.306	5.306361213
2	-1.36	4.05	5.67	3.937	3.936533594
3	6.04	2.92	6.44	5.657	5.656953309
4	4.10	1.64	3.74	3.394	3.393944388
5	-3.69	-0.05	2.27	0.615	0.615205564
6	-0.59	1.65	7.28	4.579	4.579352614
7	8.13	-1.51	1.13	2.004	2.003959119
8	8.21	12.27	15.84	13.602	13.60210567
9	-9.40	-0.64	8.96	3.369	3.368507534
10	-19.26	-8.08	1.66	-4.470	-4.47018356

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