Actively managed funds find it difficult to consistently earn higher risk-adjusted returns than a broad stock market index. The difference in return between actively managed funds and passively managed index funds can be explained by which of the following?

1. Lower expense ratios for index funds

II. Higher turnover ratios for index funds

III. Differences in returns in sectors of the market and the overall market return

Multiple Choice

I, II, and III

I and III only

II and III only

II only

I and II ONLY