A Portfolio Manager Uses Two Different Proxies for the Market

question 92

Multiple Choice

A portfolio manager uses two different proxies for the market portfolio, the S&P 500 index, and the MSCI World index. Differences in the manager's portfolio performance resulting from the different market portfolios is referred to as

• A) the size effect.
• B) the market effect.
• C) measurement error.
• D) benchmark error.
• E) manager's performance error.

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Definitions:

Implicit Marginal Costs

Costs that are not directly paid or quantified but affect the decision-making process, such as opportunity costs.

Perceived MC

Perceived Marginal Cost represents the cost perceived by a firm or individual for producing one additional unit of a good or service, factoring in not only direct cost but also subjective considerations.

Optimal Quantity

The ideal amount of a good or service that achieves the best possible outcome or utility for a consumer or company, balancing cost and benefits.

Minimum Variable Cost

The lowest point on the curve where a firm covers all its variable costs of production without considering fixed costs, often relevant in short-run output decisions.