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An investment firm’s portfolio manager is responsible for overseeing multiple client accounts. They are currently analyzing the dispersion in returns across these accounts, referred to as variance. Variance, in this context, is defined as the difference between the highest and lowest returns recorded among the accounts. The manager is evaluating various factors that contribute to this variance and is considering strategies to mitigate it.
A
Dual-benchmark optimization can reduce dispersion and help achieve higher average returns.
B
A portfolio manager's tracking error and dispersion tend to be proportional to each other over time.
C
Dispersion is always client-driven since it refers to the variance in the performances of client portfolios managed by the same manager.
D
Portfolio managers can control dispersion and should aim to reduce any existing dispersion to zero.