A portfolio's gross selectivity is made up of
A) Manager's risk.
B) Net selectivity.
C) Diversification.
D) a and b.
E) b and c.

Question

Quizplus · Accepted Answer

Gross selectivity refers to a portfolio's exposure to individual securities, and it is made up of two components: net selectivity and diversification. Net selectivity is the extent to which a portfolio manager selects individual securities that outperform their benchmark, while diversification refers to the number of individual securities held in a portfolio. Manager's risk, or active risk, is a separate measure that refers to the risk that a portfolio deviates from its benchmark due to active management decisions. Therefore, the correct choice is E, as gross selectivity is composed of net selectivity and diversification.

A Portfolio's Gross Selectivity Is Made Up of