Even if the markets are efficient, professional portfolio management is still important because it provides investors with:
I. Low-cost diversification
II. A portfolio with a specified risk level
III. Better risk-adjusted returns than an index
A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Professional portfolio management provides low-cost diversification, which is option I. It can also provide a portfolio with a specified risk level, which is option II. However, there is no guarantee that professional portfolio management will result in better risk-adjusted returns than an index, so option III is not always true. Therefore, the answer is option B, I and II only.

Even If the Markets Are Efficient, Professional Portfolio Management Is