It Is Very Hard to Statistically Verify Abnormal Fund Performance

question 85

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 realized 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:

Average Total Cost

The total cost of production divided by the total quantity produced, indicating the average cost per unit of output.

Marginal Product

The additional output that is produced by adding one more unit of a specific input, while holding other inputs constant.

Marginal Cost

Marginal cost refers to the expense of producing one additional unit of a product or service, indicating the efficiency of production processes.

Average Variable Cost

Average variable cost is the total variable costs of production divided by the number of units produced, indicating the average cost of producing each unit excluding fixed costs.