Question: Portfolio Managers

Comment on Portfolio Managers

Why D is not a correct answer? I think it is the same as B in the meaning, couldn't catch the difference between them
gmat-admin's picture

The argument suggests that, if portfolio managers are prevented from engaging in ONE specific activity (short selling), then those managers cannot provide above average returns.

For this to be a valid argument, it must be the case that short-selling is a definite requirement for providing above average returns. In other words, there's nothing else a portfolio manager can do (other than engaging in short-selling) to provide above average returns.

Answer choice B says exactly this.

Answer choice D says that short-selling has been used in the past to provide above-average returns. but it doesn't say that portfolio managers have no other strategies (beyond short-selling) that will yield above-average returns.

Hi Brent, I tried to enlist as many assumptions as I could for the question which are:
1. Above avg returns only by SS
2. Same Managers
3. Same economic evironment
4. No other factor affected fall in returns

I know that these many assumptions are not required but just wanted to know that are these assumptions correct?
gmat-admin's picture

Hi Kamakshi,

Assumptions 1 and 4 look good.
I'm not sure what you mean with assumptions 2 and 3.

Aside: You can test the validity of each assumption by applying the Negation Technique.

By assumption 2, I mean that the managers that were there before the new rule still remain i.e. there is no change in skillset
And by assumption 3, I mean that there is no sudden change in economic environment, which might otherwise affect the returns
gmat-admin's picture

Thanks for the clarification. Yes, I think those are valid assumptions.

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