There appears to be a role for a theory of active portfolio management because
A)some portfolio managers have produced sequences of abnormal returns that are difficult to label as lucky outcomes.
B)the "noise" in the realized returns is enough to prevent the rejection of the hypothesis that some money managers have outperformed a passive strategy by a statistically small,yet economic,margin.
C)some anomalies in realized returns have been persistent enough to suggest that portfolio managers who identified these anomalies in a timely fashion could have outperformed a passive strategy over prolonged periods.
D)A and B.
E)A,B,and C.

Question

Quizplus · Accepted Answer

All three options (A, B, and C) provide reasons for the need for a theory of active portfolio management. Option A highlights the potential for skill and expertise among some portfolio managers, while option B notes the difficulty in distinguishing skill from luck in investment performance. Option C highlights the possibility of persistent market anomalies that could be exploited for alpha generation. Together, these reasons justify the need for a theoretical framework to guide and evaluate active portfolio management strategies.

There Appears to Be a Role for a Theory of Active