A purely passive strategy
A)uses only index funds.
B)uses weights that change in response to market conditions.
C)uses only risk-free assets.
D)is best if there is "noise" in realized returns.

Question

Quizplus · Accepted Answer

A purely passive strategy uses only index funds, which track a specific market index, such as the S&P 500. It does not involve any active decision-making or attempt to time the market. This strategy is popular among investors who believe in the efficient market hypothesis and do not want to pay high fees for actively managed funds. Using weights that change in response to market conditions or risk-free assets would not be considered purely passive, and a purely passive strategy is not necessarily better if there is noise in realized returns.

A Purely Passive Strategy