If a Professionally Managed Portfolio Consistently Outperforms the Market Proxy

question 46

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 the options

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Definitions:

Young Children

A reference to individuals who are in the early stages of their childhood, typically ranging from infancy to elementary school age.

Spring Tide

A tide just after a new or full moon, when there is the greatest difference between high and low water.

Neap Tide

Lower-than-average high tides and higher-than-average low tides caused when the Sun’s gravity partially offsets the effects of the Moon’s gravity.

High Tide

The maximum height to which water in the ocean rises relative to the land in response to the gravitational pull of the Moon; also refers to the time when such high levels occur.