The investment strategy of Siegel (1991)suggests that investors can profit by:

A) buying equities before a trough and bonds before a peaks
B) buying bonds before a trough
C) buying equities after a trough and bonds after a peak
D) buying equities after a trough and bonds before a peak

Question

The investment strategy of Siegel (1991)suggests that investors can profit by:

A) buying equities before a trough and bonds before a peaks
B) buying bonds before a trough
C) buying equities after a trough and bonds after a peak
D) buying equities after a trough and bonds before a peak

Quizplus · Accepted Answer

The difficulty for equity market analysts is the need to predict stock market movements given beliefs about the future level of economic growth.For example,Siegel (1991)reports on a trading strategy based on timing investments such that equities are acquired just before the economy enters a trough and the equity investment is swapped to bonds just before the economy peaks.This suggests that successful prediction of peaks and troughs may be useful in increasing portfolio returns.These predictions,if accurate,will also help in forming decisions on the weighting to be applied to stocks and bonds in line with predictions of changes in the level of economic growth.

The Investment Strategy of Siegel (1991)suggests That Investors Can Profit