Risk tolerace and investment strategy

[patso]

Could some smarter guy explain this statement?
“Constant-proportion strategy would be appropriate for an investor whose risk tolerance factor rises and falls by an above average amount as her portfolio’s value fluctuates. Constant mix strategy would be appropriate for an investor whose risk tolerance factor varies proportionately with wealth”
Thank you.

 

[cpk123]

Read the line in conjunction with the graph(s) for the strategies.
Constant mix=straight line
constant prop=concave strategy

 

[broadex]

I thought
constant prop = convex
Constant mix = concave
However these dont seem to explain the statement. Im also failing to fully understand this statement.

 

[S2000magician]

broadex wrote:I thought
constant prop = convex
Constant mix = concave
However these dont seem to explain the statement. Im also failing to fully understand this statement.

CPK’s correct.
My error.
CPPI is convex.
Buy and Hold is linear.
Constant Mix is concave.

 

[broadex]

Im pretty sure that im correct as i have my study material open. Also re-cheched this when i saw this post below which seems to agree with my understanding.
http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91338282

 

[Viceroy]

broadex wrote:
I thought
constant prop = convex
Constant mix = concave
However these dont seem to explain the statement. Im also failing to fully understand this statement.

This is my understanding as well.