Confused about solution 4. It states the underlying beta is targeted at 1 and is therefore considered a passive strategy. Then it concudes that no top-down forecasting is requried.
I would say that no bottom-up forecasting is required because security selection is NOT an issue. That’s how Solution 1 was when tracking error is minimised.
I see Q1 and Q4 being the same logic.
Solution 4 is confusing because right after the say NO top down forecasting is required they then mention – IN CONTRAST – and talk about the bottom up forecast. Am I just reading something wrong.
The solution for 4 is written as No Top down for the initial part and then Bottom up for the second part.
Thanks