The share market moves ahead of the property market by roughly one to four quarters
A worked RES examination question on primary secondary market, from our Paper 1 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
A salesperson is preparing a note on why the property market is described as lagging, and how that description can be put to use rather than merely observed.
Consider the following statements.
- (i) The share market moves ahead of the property market.
- (ii) Because property lags, movements in the share market can be read as an early indicator.
- (iii) The lag typically runs between one and four quarters.
- (iv) Because property lags, no other market can assist in anticipating its movements.
The answer, and why
Answer: A
The rule. The share market moves ahead of the property market by roughly one to four quarters. Because property lags, share market movements can be read as an early indicator.
Why A is correct. (i), (ii) and (iii) are correct. (iv) is false and contradicts (ii) — the lag is precisely what makes anticipation possible.
The other options.
- B takes all four, holding (ii) and (iv) together.
- C carries the false (iv).
- D pairs the correct (i) with the contradictory (iv).
Exam note. A lag is useful information, not an obstacle. An option saying that lagging makes forecasting impossible has the logic backwards.
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