Moving money in and out of the market based on your market expectations is called __________ and tends to lead to returns that are __________ than the overall market return, assuming that the market is efficient.
A) asset allocation; higher
B) asset allocation; lower
C) market timing; higher
D) market timing; lower
E) security selection; higher

Question

Quizplus · Accepted Answer

Market timing involves trying to predict short-term movements in the market, which is difficult to do consistently. This can lead to lower returns than the overall market return, assuming that the market is efficient. Asset allocation involves spreading investments across different asset classes, which can lead to higher returns than the overall market return in the long run. Security selection involves picking individual securities, but it may not lead to higher returns than the overall market return due to the difficulty in consistently selecting winners.

Moving Money in and Out of the Market Based on Your