SIE Exam Question 826: Answer and Explanation

Question: 826

All but which of the following are correct regarding the stock market trading pattern known as "sector rotation"?

• A. It involves shifting investments from one sector of the economy to another.
• B. It is a passive investment strategy, similar to indexing.
• C. It assumes that sector performance is correlated to the business cycle.
• D. It can be expensive to implement because of the potential costs associated with extensive trading activity.

Correct Answer: B

Explanation:

Sector rotation involves shifting investments from one sector of the economy to another. It assumes that sector performance is correlated to the business cycle, and it can be expensive to implement because of the potential costs associated with extensive trading activity. It is an active investment strategy, not passive.