(Last Word) Before being adjusted for costs,
A) actively managed funds outperform index funds.
B) actively managed funds and index funds perform about the same.
C) index funds outperform actively managed funds.
D) arbitrage equalizes the average expected rates of return and beta levels on index and actively managed funds.

Question

Quizplus · Accepted Answer

Before costs, actively managed funds and index funds perform about the same because both are exposed to the same market risks and opportunities. However, actively managed funds often incur higher costs, which can affect their net performance.

(Last Word) Before Being Adjusted for Costs