If a Market Proxy Portfolio Consistently Beats All Professionally-Managed Portfolios

question 20

Multiple Choice

If a market proxy portfolio consistently beats all professionally-managed portfolios on a risk-adjusted basis, it may be concluded that

• A) the CAPM is valid.
• B) the market proxy is mean/variance efficient.
• C) the CAPM is invalid.
• D) the CAPM is valid and the market proxy is mean/variance efficient.
• E) the market proxy is mean/variance efficient and the CAPM is invalid.

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Definitions:

Marginal Cost

A rise in the comprehensive cost when producing an additional unit of a product or service.

Fixed Cost

A charge that stays the same, no matter how much is produced or sold in terms of goods or services.

Variable Costs

Expenses that vary directly with the level of production or volume of output.

Snow-clearing

The process of removing snow from surfaces, like roads and walkways, to make them accessible and safe.