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

Question

Quizplus · Accepted Answer

Gross selectivity is a measure of a portfolio’s ability to beat its benchmark. It is made up of net selectivity and diversification. Net selectivity is the manager's ability to select securities that outperform the benchmark, while diversification is the extent to which the portfolio is spread across different asset classes and sectors to reduce overall risk. Manager's risk, which refers to the risk associated with the manager's investment decisions, is not a component of gross selectivity. Therefore, the correct answer is E, which includes both net selectivity and diversification as components of gross selectivity.

A Portfolio's Gross Selectivity Is Made Up of