Consider the Theory of Active Portfolio Management

question 3

Multiple Choice

Consider the theory of active portfolio management.Stocks A and B have the same beta and non-systematic risk.Stock A has higher positive alpha than stock B. You should want __________ in your active portfolio.

• A) equal proportions of stocks A and B
• B) more of stock A than stock B
• C) more of stock B than stock A
• D) more information is needed to answer this question

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Definitions:

Foot-in-the-door

A persuasion technique that involves getting a person to agree to a small request to increase the likelihood of agreeing to a larger request later.

Persuasion

The process of influencing someone's beliefs, attitudes, intentions, motivations, or behaviors.

Confederate

Someone who appears to be a research participant but actually is part of the research team.

Experimenter

An individual who conducts an experiment, typically a researcher or scientist, to test hypotheses and observe outcomes in a controlled setting.