Which of the following statements about returns-based analysis or effective mix analysis is true?
A) This analysis compares the historical return pattern of the portfolio in question with the historical returns of various well-specified indexes.
B) This analysis uses sophisticated quadratic programming techniques to indicate what styles or style combinations were most similar to the portfolio's actual historical returns.
C) This analysis is based on the belief that the portfolio's current make-up will be a good predictor for the next period's returns.
D) Choices a and b
E) All of the above statements describe returns-based analysis or effective mix analysis

Question

Quizplus · Accepted Answer

Option A is correct in stating that returns-based analysis compares the historical return pattern of the portfolio in question with the historical returns of various well-specified indexes. Option B, however, is incorrect as effective mix analysis uses linear programming techniques, not quadratic programming techniques. Option C is also incorrect because effective mix analysis is not based on the belief that the portfolio's current make-up will be a good predictor for future returns. Therefore, choices A and B are correct while C is incorrect, leading to the answer of D.

Which of the Following Statements About Returns-Based Analysis or Effective