If a market proxy portfolio consistently beats all professionally managed portfolios on a risk-adjusted basis,it may be concluded that
A)the CAPM is valid.
B)the market proxy is mean/variance efficient.
C)the CAPM is invalid.
D)A and B.
E)B and C.

Question

Quizplus · Accepted Answer

The market proxy portfolio is mean/variance efficient because it consistently beats all professionally managed portfolios on a risk-adjusted basis. This means that the market proxy portfolio has a higher expected return for a given level of risk than any other portfolio. The CAPM is also valid because it implies that the market portfolio is mean/variance efficient.

If a Market Proxy Portfolio Consistently Beats All Professionally Managed