The theory behind the mutual fund cash ratio is
A) mutual fund managers hold high levels of cash when they are optimistic about market conditions.
B) when mutual fund managers hold high levels of cash, they must eventually buy stocks with it.
C) when mutual fund managers hold low levels of cash they are pessimistic about market conditions.
D) when market conditions are favorable, shareholders remit more cash than the managers can invest.

Question

Quizplus · Accepted Answer

The mutual fund cash ratio theory suggests that when mutual fund managers hold high levels of cash, it indicates they have a reserve to buy stocks with in the future. This is based on the idea that cash held by mutual funds is eventually used to purchase stocks, which can influence market dynamics.

The Theory Behind the Mutual Fund Cash Ratio Is