There Appears to Be a Role for a Theory of Active

question 9

Multiple Choice

There appears to be a role for a theory of active portfolio management because

• A) some portfolio managers have produced sequences of abnormal returns that are difficult to label as lucky outcomes.
• B) the "noise" in the realized returns is enough to prevent the rejection of the hypothesis that some money managers have outperformed a passive strategy by a statistically small, yet economic, margin.
• C) some anomalies in realized returns have been persistent enough to suggest that portfolio managers who identified these anomalies in a timely fashion could have outperformed a passive strategy over prolonged periods.
• D) some portfolio managers have produced sequences of abnormal returns that are difficult to label as lucky outcomes, and the "noise" in the realized returns is enough to prevent the rejection of the hypothesis that some money managers have outperformed a passive strategy by a statistically small, yet economic, margin.
• E) All of the options are correct.

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Definitions:

Inverse

The opposite or reverse relationship, where an increase in one variable leads to a decrease in another, and vice versa.

Price Floors

A minimum price set by the government for certain goods and services, intended to ensure fair conditions and prevent market price from falling below a certain level.

Surpluses

Occurs when the supply of a particular good or service exceeds its demand, often leading to a decrease in prices.

Shortages

Shortages occur when the demand for a product exceeds the supply available at a particular price, often leading to higher prices and waiting times.