The critical variable in the determination of the success of the active portfolio is the share's ________.
A)alpha/non-systematic risk
B)alpha/systematic risk
C)delta/non-systematic risk
D)delta/systematic risk

Question

Quizplus · Accepted Answer

Alpha refers to the excess return of a stock or portfolio over its benchmark. The active portfolio's success is determined by its alpha, which relates to the non-systematic risk or the risk that is specific to the company, industry, or sector. Systematic risk, represented by beta, affects the overall market or specific sector, and cannot be diversified away by holding a well-diversified portfolio. Delta is not a relevant term in this context.

The Critical Variable in the Determination of the Success of the Active