Question

20. If a market is efficient, then the best trading strategy is to (a) trade actively...

20. If a market is efficient, then the best trading strategy is to (a) trade actively (b) trade passively (c) no trade

Homework Answers

Answer #1

The correct answer is (b) trade passively

A passive trading involves a buy and hold stratergy where the investor would hold the stock for a long period of time. This does not involve frequent buying and selling to make profits out of market fluctuations. The goal of passive trading is to reap the long term benefits. When a stock is held for a long term this increases the value of stock overtime. This stratergy can be considered for long term investments. Trading passively has lower costs as compared to trading actively as brokerage and other expenses are less than active trading.Since stocks are not sold frequently in passive trading it results in lower capital gains as well.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A market in which insider trading do not exist is __________. Multiple Choice Systematically efficient. Completely...
A market in which insider trading do not exist is __________. Multiple Choice Systematically efficient. Completely efficient. Semi-strong from efficient. Weak form efficient. Strong form efficient.
Electron Transport Chain (ETC) proteins A) actively pump protons from the matrix into the intermembrane space...
Electron Transport Chain (ETC) proteins A) actively pump protons from the matrix into the intermembrane space B) actively pump protons from the intermembrane space into the matrix C) passively transport protons from the matrix into the intermembrane space D) passively transport protons from the intermembrane space into the matrix E) ETC proteins synthesise ATP
What are the trade-offs between an internal and an external growth strategy? Which approach is best...
What are the trade-offs between an internal and an external growth strategy? Which approach is best as an international entry strategy? How is corporate parenting different from portfolio analysis? How is it alike? Is it a useful concept in a global industry?
3] Select the most accurate match between the secondary bond trading strategy and its description... A....
3] Select the most accurate match between the secondary bond trading strategy and its description... A. Credit Defense Trade: Using this strategy, bond traders are looking to protect against worsening conditions such as a downturn in the economy or deteriorating business conditions for given issuer(s) in order to protect against bond price drops while increasing yields when switching to different bonds. B. Sector-Rotation Trades: Using this strategy, bond traders are looking to take advantage of market changes they are forecasting...
The efficient market hypothesis suggests which of the following (I) investors should not try to outguess...
The efficient market hypothesis suggests which of the following (I) investors should not try to outguess the market by constantly buying and selling securities. (II) investors do better on average if they adopt a “buy and hold” strategy. (III) Investors can earn abnormal profits by using past trading patterns of stocks. A.) (I) and (II) B.) (I) and (III) c.) all of the above are sensible strategies. d.) (II) and (III)
Suppose you believe that the security market is at efficient in the semi-strong form. You are...
Suppose you believe that the security market is at efficient in the semi-strong form. You are considering buying some mutual fund shares in your investment accounts. Which of the following statements is correct? a. Actively managed funds are good choices because they may consistently beat the market, they are tax efficient and have lower expenses. b.Actively managed funds are not good choices because they cannot consistently beat the market although they are tax efficient and have lower expenses. c.Index funds...
The semistrong form of the efficient market hypothesis is best described as stating that ________ must...
The semistrong form of the efficient market hypothesis is best described as stating that ________ must be reflected in the current stock price. a. All security price and volume data b. All information contained in the financial statements c. All publicly available information d. All relevant information, including inside information e. All costless information
State whether each of the following is inconsistent with an efficient capital? market, the? CAPM, or?...
State whether each of the following is inconsistent with an efficient capital? market, the? CAPM, or? both: a. A security with only diversifiable risk has an expected return that exceeds the? risk-free interest rate. b. A security with a beta of 1 had a return last year of? 15% when the market had a return of? 9%. c. Small stocks with betas of 1.5 tend to have higher returns on average than large stocks with betas of 1.5.?? a. A...
Suppose trader John is Moderate bullish on the market, which trading strategy (or strategies) will you...
Suppose trader John is Moderate bullish on the market, which trading strategy (or strategies) will you recommend to him? Long a butterfly Long a call Long a bull spread Short a call Short a butterfly
Suppose trader John is Moderate bullish on the market, which trading strategy (or strategies) will you...
Suppose trader John is Moderate bullish on the market, which trading strategy (or strategies) will you recommend to him? Short a butterfly Long a call Long a bull spread Long a butterfly Short a call
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT