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CFA Level 3 - Economics - Capital Market Expectations, Part 2
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As the Chief Investment Officer of a large sovereign wealth fund, you are developing capital market expectations for the next 10 years. Your team has analyzed historical data, current market conditions, and long-term economic trends. A key consideration is the potential impact of the growing influence of social media on consumer behavior and corporate strategies. Your analysis suggests that the increasing use of social media platforms will likely lead to more rapid shifts in consumer preferences, greater brand loyalty for companies that effectively engage with customers online, and increased volatility in certain sectors. However, there are also concerns about the potential for social media to amplify misinformation, contribute to political polarization, and create reputational risks for companies. To best incorporate the potential impact of social media into your capital market expectations, which approach would you take?
a.
Assume that the impact of social media on consumer behavior and corporate strategies will be minimal and maintain your existing capital market expectations without any adjustments based on this factor.
b.
Significantly overweight sectors and companies that have a strong social media presence and engagement, based on the assumption that they will outperform in the long run, and underweight those that have been slow to adapt to the growing influence of social media, even if this results in a less diversified portfolio.
c.
Incorporate the impact of social media as a qualitative factor in your analysis, considering both the potential benefits and risks for different sectors and companies, and adjust your capital market expectations accordingly.
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