A portfolio manager uses two different proxies for the market portfolio, the S&P 500 index, and the MSCI World index. Differences in the manager's portfolio performance resulting from the different market portfolios is referred to as
A) the size effect.
B) the market effect.
C) measurement error.
D) benchmark error.
E) manager's performance error.

Question

Quizplus · Accepted Answer

The differences in the manager's portfolio performance resulting from the use of different market portfolios (S&P 500 vs. MSCI World) is referred to as benchmark error. This is because the market portfolio serves as a benchmark against which the manager's performance is evaluated, and using different benchmarks can result in differences in the measured performance.

A Portfolio Manager Uses Two Different Proxies for the Market