Since the first regression analysis didn’t measure Walters’ value slant, we have no information to suggest he increased the value weighting in his portfolio because he found value stocks more appealing. Style drift is not the answer, as the lack of benchmarks in the first analysis does not assess his value slant, and the second regression analysis shows a smaller effect from large and small stocks, suggesting that if anything, Walters tightened up his style focus. Of the choices provided, the best explanation for a rise in money-market exposure is increased bearishness. Apparently, Walters wanted to take more of his assets out of the market, and he sold off mostly large-cap and small-cap stocks to raise the cash |
