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Which of the following is not true of an informationally efficient market? a) Prices are like...

Which of the following is not true of an informationally efficient market? a) Prices are like a casino b) You cannot beat the market so you may as well hold the market portfolio c) Active stock selection will not yield a return that is statistically different from guessing stock selection. d) Movements in the prices of shares are not predictable.

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Answer #1

informationally efficient market means that prices of stocks incorporate all available information.

so share prices are correctly determined on the basis of information available today. so in any case, the prices are correctly value and so the market portfolio. so there are no chances of making any abnormal returns. and as prices are determined on the basis of information today, the prices are not predictable.

so only option (a) is incorrect : Prices are like a casino

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