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Consider the following statements on the market timing ability of portfolio managers. Statement I. If...

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Accounting

Consider the following statements on the market timing ability of portfolio managers.

Statement I. If the portfolio manager maintains constant proportions in the risk-free asset and the market portfolio, then the portfolio's security characteristic line will plot as a line with a constant slope.

Statement II. A portfolio manager's market timing ability can be evaluated by using the Black-Scholes-Merton Option Pricing model, using an exercise price equal to that of the market index and a time to expiration equal to the manager's forecasting horizon.

Statement III. If the forecaster correctly forecasts bull markets 60% of the time and correctly forecasts bear markets 40% of the time, then the forecaster's market timing score is 100%.

Which of the following is correct?

a. Statement IlI is cotrect, Statements I and II are incorrect. O

b. Statement II is correct, Statements I and Ill are incorrect. O

. Statement I is correct, Statements II and Ill are incorrect.

d. Statements I, II and III are incorrect.

e. Statements I, Il and Ill are correct. ire

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