If a Professionally Managed Portfolio Consistently Outperforms the Market Proxy

question 38

Multiple Choice

If a professionally managed portfolio consistently outperforms the market proxy on a risk-adjusted basis and the market is efficient,it should be concluded that _______________.

• A) the CAPM is invalid
• B) the proxy is inadequate
• C) either the CAPM is invalid or the proxy is inadequate
• D) the CAPM is valid and the proxy is adequate
• E) none of these

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Definitions:

Real Assets

Assets that have physical form or are tangible, such as real estate, commodities, or natural resources, as opposed to financial assets like stocks or bonds.

Wealth Distribution

The manner in which wealth is shared among individuals in a society, often analyzed for its levels of equality or inequality.

Coincidence of Wants

A situation in a barter economy where two parties each possess goods or services that the other wants, facilitating a direct exchange without the need for money.

Barter

The direct exchange of one good or service for another good or service.