Before Taking Management and Trading Costs into Account, Arbitrage Activities

question 68

Multiple Choice

Before taking management and trading costs into account, arbitrage activities in the market ensure that the returns of actively managed funds are

• A)significantly higher than those of index funds with similar risk.
• B)significantly lower than those of index funds with similar risk.
• C)about the same as those of index funds with similar risk.
• D)more volatile than those of index funds with similar risk.

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Definitions:

Psychometrics

The science of measuring mental capacities and processes.

Biological Perspective

An approach in psychology and biology that examines behaviors, emotions, and thoughts in terms of biological factors, such as genetics, brain circuits, and chemicals.

Cognitive Perspective

An approach in psychology that focuses on how people perceive, think about, and remember information, often emphasizing the role of mental processes in behavior and development.

Mind

The set of cognitive faculties that enables consciousness, perception, thinking, judgement, and memory—a characteristic of humans and other animals.