CFA Level 1 Question of the Week – Equity Investments

The correct answer is B.

In an informationally efficient capital market, investors should use a passive management style because an active management strategy has high transaction and execution costs which is why actively managed investments should underperform.

dollface said:

Assuming informationally efficient, active and passive should net the same returns. However passive should be more cost-efficient, so passive should have the highest net returns.

…right?

Exactly, you have the right thought process.