It is difficult for an actively managed investment fund to outperform an index fund because ?
A. stock markets tend to be inefficient
B. all of these answers
C. index funds are able to buy undervalued stocks
D. actively managed funds trade more often and charge fees for their alleged expertise
Speculative bubbles may occur in the shares market ?
A. during periods of extreme pessimism because so many stocks become undervalued
B. only when people are irrational
C. when stocks are fairly valued
D. because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date
Which of the following reduces risk in a portfolio the greatest ?
A. Increasing the number of shares from 10 to 20
B. All of these answers provide the same amount of risk reduction
C. Increasing the number of shares in the portfolio from 1 to 10
D. Increasing the number of shares from 20 to 30
A. information analysis
B. risk management
C. fundamental analysis
D. diversification
Diversification of portfolio can ?
A. reduce aggregate risk
B. eliminate all risk
C. increase the standard deviation of the portfolio’s return
D. reduce idiosyncratic risk
Which of the following is an example of moral hazard ?
A. After Gull buys fire insurance, he begins to smoke cigarettes in bed.
B. None of these answers demonstrate moral hazard
C. Mahmood has been feeling poorly lately so he seeks health insurance
D. All of these answers demonstrate moral hazard