Hi all,
Just wondering if someone can justify the answer on Question no.3
I don’t understand why “Manager B’s excess return is more a matter of luck than skill”?
Hi all,
Just wondering if someone can justify the answer on Question no.3
I don’t understand why “Manager B’s excess return is more a matter of luck than skill”?
We are looking at passive equity managers and the related exhibit is titled “Equity Replication Managers”.
The goal of Manager B is to replicate the index, not to generate excess return. He therefore did not (actively) attempt to achieve excess return by using his skill. Therefore, the excess return has been achieved as a matter of luck.