Question

Proponents of the EMH typically advocate MULTIPLE CHOICE A. investing in hedge funds. B. buying individual...

Proponents of the EMH typically advocate MULTIPLE CHOICE

A. investing in hedge funds.

B. buying individual stocks on margin and trading frequently.

C. buying individual stocks on margin, trading frequently, and investing in hedge funds.

D. a passive investment strategy.

E. investing in hedge funds and a passive investment strategy.

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Answer #1

D. a passive investment strategy.

The Efficient Market Hypothesis states that share prices reflect all information and consistent above normal returns are impossible to generate. Theoretically, neither technical nor fundamental analysis can produce risk-adjusted excess returns, or alpha, consistently and only inside information can result in outsized risk-adjusted returns. Therefore, a psaaive startegy would be better option instead of incurring expenses on active management.

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