Consider the theory of active portfolio management. Shares A and B have the same beta and the same positive alpha. Share A has higher non-systematic risk than share B. You should want ________ in your active portfolio.
A)equal proportions of shares A and B
B)more of Share A than Share B
C)more of Share B than Share A
D)more information is needed to answer this question

Question

Quizplus · Accepted Answer

Active portfolio management seeks to maximize returns while minimizing risks. Shares A and B have the same beta and the same positive alpha, suggesting that they have the same expected return. However, share A has higher non-systematic risk than share B, indicating that it is more volatile and unpredictable. Therefore, to minimize risks, it is advisable to hold more of share B than share A in the active portfolio.

Consider the Theory of Active Portfolio Management