Consider the Theory of Active Portfolio Management

question 17

Multiple Choice

Consider the theory of active portfolio management.Stocks A and B have the same positive alpha and the same nonsystematic risk.Stock A has a higher beta 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:

Information

Data that has been organized or presented in a meaningful way to aid understanding or decision-making.

Organized

The state of being efficiently arranged or structured in a systematic way for ease of use or access.

Petabyte

10^15 bytes of digital information.

Gigabyte

A unit of digital information that equals approximately 1 billion bytes or 1,000 megabytes.