Empirical Evidence on the Majority of CFA® Level 1 Exam Results

Empirical Evidence

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Question

The majority of empirical evidence indicates that

Answers

A. the gross returns on mutual funds tend to as good as or slightly better than those on buy-and-hold strategies, while the net returns on mutual funds tend to be slightly lower than those on buy-and-hold strategies.

B. the gross returns on mutual funds tend to as good as or slightly worse than those on buy-and-hold strategies, while the net returns on mutual funds tend to be significantly lower than those on buy-and-hold strategies.

C. the gross returns on mutual funds tend to be significantly better than those on buy-and-hold strategies, while the net returns on mutual funds tend to be about equal to those on buy-and-hold strategies.

D. the gross and net returns on mutual funds tend to be significantly higher than those on buy-and-hold strategies.

E. the gross and net returns on mutual funds tend to be significantly lower than those on buy-and-hold strategies. E

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Explanations

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A. B. C. D. E.

Explanation

Net returns (which take account for research and trading costs) have been about 1% lower on mutual funds than on buy-and-hold strategies. Because of these studies, index funds have grown in popularity. Because index funds only imitate a broad market index, they have no research costs and minimal trading expenses.

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