CFA Practice Question
Which statement is FALSE?
A. The expected alpha return is zero for passive managers.
B. Passive managers position their portfolios to take on market risk.
C. In theory, betas of funds using absolute return strategies should be close to risk-free rate.
Explanation: C: They should be close to zero.
A is true: they don't seek alpha return.
User Contributed Comments 3
| User | Comment |
|---|---|
| Inaganti6 | How is B correct ? If you're taking on market risk aren't you doing so because you think you can outsmart the market which mean's it's an active and not passive strategy ? |
| dada | yes B is correct. Taking on market risk means it is not taking specific risk - that is, it's NOT trying to beat the market. |
| ascruggs92 | ^what dada said. I can see how you misread that though, it would be more clear if it said "to only take on market risk" |