Asset Allocation Accounts for Less Than 50 Percent of the Variance

question 16

True/False

Asset allocation accounts for less than 50 percent of the variance in quarterly returns for a typical pension fund.

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Definitions:

Gross Investment

The total amount spent on purchasing or building new fixed assets and on replacing old assets, without deducting for depreciation.

Net Investment

The total amount spent on capital assets (like plant and equipment) minus depreciation, reflecting the actual increase in an entity's productive capacity.

Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value of assets due to use, wear and tear, or obsolescence.

Implicit Cost

An indirect, non-payment expense represented by the opportunity cost of utilizing resources in a specific project instead of elsewhere.