A Portfolio Manager Without Superior Analytical Skills Should

question 35

Multiple Choice

A portfolio manager without superior analytical skills should

• A) Determine and quantify the risk preferences of a client.
• B) Minimize transaction costs.
• C) Maintain the specified risk level.
• D) Ensure that the portfolio is completely diversified.
• E) All of the above.

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Definitions:

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of data values.

Risk-averse

Refers to the preference of an individual or entity to avoid risk rather than facing it, often choosing options with more predictable and less risky outcomes.

Expected Income

The amount of money one anticipates earning over a certain period, factoring in various possible outcomes.

Expected Utility

A theory in economics that calculates the utility of an individual or entity based on the likelihood of different outcomes, combining both the value of outcomes and their probabilities.