It Is Very Hard to Statistically Verify Abnormal Fund Performance

question 2

Multiple Choice

It is very hard to statistically verify abnormal fund performance because of all except which one of the following?

• A)Inevitably some fund managers experience streaks of good performance that may just be due to luck
• B)The noise in realised rates of return is so large as to make it hard to identify abnormal performance in competitive markets
• C)Portfolio composition is rarely stable long enough to identify abnormal performance
• D)Even if successful, there is really not much value to be added by active strategies such as market timing

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Definitions:

Non-collusive Oligopoly

A market structure where a small number of firms compete independently, without agreements or collusion between them.

Diagram

A visual representation that outlines, explains, or clarifies complex data or relationships using symbols, icons, lines, and texts.

Collusive Oligopoly

A market situation where a few companies control a large market share and agree, often illegally, to fix prices, limit production, or divide markets to maximize profits.

Price Increase

The rise in the cost of goods or services over time or due to market conditions.