According to Markowitz and other proponents of modern portfolio theory, which of the following activities would not be expected to produce any benefits?
A) diversifying
B) investing in treasury bills
C) investing in stocks of utility companies
D) engaging in active portfolio management to enhance returns

Question

Quizplus · Accepted Answer

According to modern portfolio theory, active portfolio management to enhance returns may not produce significant benefits because it may lead to higher transaction costs and may not result in consistent outperformance of the overall market. Therefore, it is not guaranteed to produce benefits as compared to diversifying or investing in assets with a low correlation to each other. Investing in treasury bills and stocks of utility companies can also provide benefits based on the investor's risk tolerance and investment goals.

According to Markowitz and Other Proponents of Modern Portfolio Theory