Question

A mutual fund timing the market...

		...will add high-beta stocks to the portfolio when market expansion is expected.
		...will have a high M2 measure.
		... will purchase assets that plot below the SML.
		...will employ short selling.

Answer 1

High Beta stocks will have higher returns related to the market and in the same direction of the market movement. A mutual fund timing the market will usually use add the high beta stocks, as when the market expansion is expected, the stock prices are expected to move upwards, and the high beta stocks will move upwards faster, thus leading to higher returns.