"Active investment management may generate additional returns at times of about 0.1%.However,the standard deviation of the typical well diversified portfolio is about 20%,so it is very difficult to statistically identify any increase in performance." Even if true,this statement is an example of the _________ problem in deciding how efficient the markets are.
A) magnitude
B) selection bias
C) lucky event
D) allocation

Question

Quizplus · Accepted Answer

The statement describes the "magnitude" problem, which refers to the difficulty in detecting small performance improvements due to the large variability (standard deviation) in portfolio returns.

"Active Investment Management May Generate Additional Returns at Times of About