CFA Practice Question

There are 136 practice questions for this study session.

CFA Practice Question

Which statement is true?
A. In general value added is positive.
B. The Sharpe ratio of the benchmark portfolio is higher than those of most of the individual assets.
C. The transfer coefficient cannot be negative.
Explanation: A: If the investor underperforms the benchmark portfolio, value added will be negative (after the fact). It would be expected to be positive before the fact or active management would generally not be justified.

B: This is due to diversification.

C: The transfer coefficient could be negative if relative weights are negatively correlated with current expected returns.

User Contributed Comments 0

You need to log in first to add your comment.