Which of the following is true regarding active portfolio management strategy?
A) The goal of active portfolio management is to earn an excess return on the risk-adjusted basis
B) An actively managed portfolio has lower total transaction costs
C) An actively managed portfolio has lower risk than the passive benchmark
D) A key to success for an actively managed portfolio is to maximize trading activity
E) All of the above

Question

Quizplus · Accepted Answer

The goal of active portfolio management is to earn an excess return on the risk-adjusted basis by using various investment strategies and techniques to outperform the market returns.

B, C, and D are incorrect. Active portfolio management usually involves higher transaction costs due to frequent buying and selling of securities, it may have higher risk than the passive benchmark due to taking on more active bets and deviation from the benchmark, and maximizing trading activity is not always a key to success as it may increase transaction costs and decrease overall returns.

Which of the Following Is True Regarding Active Portfolio Management