7) Studies have shown that a market indexed fund will likely outperform a mutual fund. Which of the following explanations would not support the basis for this observation?

A) An indexed fund has a greater likelihood of being able to eliminate unsystematic risk.

B) Mutual fund managers with superior past performance would likely attract more clients and therefore have more capital to invest. Since superior investment opportunities are limited, this would dilute the returns the manager could be expected to achieve.

C) Charging a fixed percentage fee dilutes the net return available to mutual fund investors.

D) Trading costs often outweigh the benefits that could be derived from profitable trading opportunities available to the mutual fund manager.

Answer: