Consider the theory of active portfolio management.Stocks A and B have the same beta and non-systematic risk.Stock A has higher positive alpha than stock B. You should want __________ in your active portfolio.
A) equal proportions of stocks A and B
B) more of stock A than stock B
C) more of stock B than stock A
D) more information is needed to answer this question

Question

Quizplus · Accepted Answer

Since stock A has a higher positive alpha than stock B, it is expected to outperform stock B in the future. Therefore, it is preferable to have more of stock A in the active portfolio.

Consider the Theory of Active Portfolio Management