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:

Cash Payments Journal

A specialized accounting journal used to record all cash outlays of a business, including expenses, asset purchases, and debt payments.

Purchases Journal

A record of all purchase transactions for inventory, usually on credit, maintained by a business.

Credit Balance

A situation in accounting where the total credits in an account exceed the total debits, commonly seen in liability accounts.

Doubtful Accounts

Doubtful accounts are receivables that a company believes might become uncollectible in the future, leading to their designation as a bad debt expense.