What trading behavior is associated with a constant proportion strategy?

The strategy being referred to in the context of a constant proportion investment strategy involves continuously adjusting the allocation of assets to maintain a specific ratio between different asset classes in a portfolio, regardless of market movements. This approach typically entails buying more of an asset class that has decreased in value and selling portions of asset classes that have appreciated, thereby ensuring that the proportion of each asset class relative to the others remains consistent.

In this case, the correct answer reflects a behavior where an investor sells stocks as prices decline and buys them as prices rise. This aligns with the principles of a constant proportion strategy, which aims to rebalance the portfolio to a desired risk profile or allocation. In a falling market, buying more of undervalued stocks allows the portfolio to maintain the targeted proportion of equities, while selling higher-priced stocks helps to reduce overexposure to those appreciating assets. This continuous adjusting of positions based on price movements ensures adherence to the desired allocation ratio over time.

Meanwhile, the other options describe behaviors that do not fit the specific mechanics of a constant proportion strategy. For example, aggressively buying stocks during downturns could imply a more tactical approach rather than maintaining a strict proportional allocation. Holding cash in volatile markets doesn't involve maintaining proportionality among existing assets. Maintaining equal weights across