Question

One type of passive portfolio management is ________.A. investing in a well-diversified portfolio without attempting to search out mispriced securitiesB. investing in a well-diversified portfolio while only seeking out passively mispriced securitiesC. investing an equal dollar amount in index stocksD. investing in an equal amount of shares in each of the index stocks

Answer 1

The correct answer is letter "A": investing in a well-diversified portfolio without attempting to search out mispriced securities.

Step-by-step explanation:

Passive management is a managerial strategy where the fund's portfolio is based on market indexes. The portfolio consists of asset class diversification expending the lesser time or resources possible during the market open hours. According to a research of Eugene Fama (born in 1939) on this approach, attempts to profit from mispriced stocks are useless since their price movement is owed to events usually unpredictable.