In a top-down analysis of portfolio construction
A) decisions about which executives will manage the portfolio are made first,then capital allocation decisions are made.
B) decisions about asset allocation are made first,then specific securities are chosen.
C) decisions about specific securities are made first,then asset allocation decisions are made.
D) all securities transactions must be approved by upper-level management.
E) an investor's first decision would be about how much to hold in her favorite stock.

Question

Quizplus · Accepted Answer

In a top-down approach, decisions about asset allocation are made first, followed by specific security selection. This approach focuses on the overall market conditions and how to allocate the portfolio in a way that aligns with the investor's goals and risk tolerance. Once asset allocation is determined, specific securities within each asset class can be chosen.

In a Top-Down Analysis of Portfolio Construction