Financial Risk Manager Part 2
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Following Grinold's fundamental law of active management, one should find:
A
Sector allocation is the most important factor in active management.
B
To maximize the information ratio, active investors need to either have high-quality predictions or place a large number of investment bets in a given year.
C
A small number of investment bets decreases the chances of making a mistake and, therefore, increases the expected investment performance.
D
Investors should focus on increasing only their predictive ability relative to stock price movements.