If a professionally managed portfolio consistently outperforms the market proxy on a risk-adjusted basis and the market is efficient,it should be concluded that _________.
A)the CAPM is invalid
B)the proxy is inadequate
C)either the CAPM is invalid or the proxy is inadequate
D)the CAPM is valid and the proxy is adequate
E)none of the above

Question

Quizplus · Accepted Answer

If a portfolio consistently outperforms the market on a risk-adjusted basis in an efficient market, it suggests either the CAPM is not capturing all relevant risks (invalid) or the market proxy used is not a true representation of the market (inadequate).

If a Professionally Managed Portfolio Consistently Outperforms the Market Proxy