It is difficult for an actively managed investment fund to outperform an index fund because ?
Correct answer: D. actively managed funds trade more often and charge fees for their alleged expertise
- A. stock markets tend to be inefficient
- B. all of these answers
- C. index funds are able to buy undervalued stocks
- D. actively managed funds trade more often and charge fees for their alleged expertise
Explanation
Active funds often trade more frequently and charge management fees, creating costs that an index fund largely avoids. The other statements are inconsistent with the usual efficient-market explanation, so 'all of these' cannot be correct.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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