Question

If financial markets are semi-strong form efficient, all investors can effectivley select stocks for their portfolio...

If financial markets are semi-strong form efficient, all investors can effectivley select stocks for their portfolio by throwing darts at the Wall Street Journal stock page. Any stock selected by dart throwing will be just as good an investment as stocks in a professionally-developed portfolio.

a. This is false because if you pick stocks via darts, investors may not up with a desirable risk-return combination.

b. This is false because professionals can guarantee higher portfolio performance given the same level of risk.

c. This is false because the markets are primarily dominated by institutional investors with deep pockets.

d. This is true because in a semi-strong form efficient stock market, all portfolios should earn the market rate of return.

e. This is true because semi-strong form efficiency means that all stocks are correctly priced -- given publicly available information.

Homework Answers

Answer #1

The correct answer is

a.This is false because if you pick stocks via darts, investors may not up with a desirable risk-return combination.

Explanation:

Professionals are having experience about market histories. If we select via just throwing darts, it is possible that we select all the riskiests stocks which do not perform even in the strong and efficient market to come.

Professionals select stocks by managing risks i.e. selecting both high and low risk stocks in a neutral way and thus our average return on capital remains higher than selecting stocks by throwing dart.

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
Assume that markets are weak-form efficient, but not semi-strong form or strong form efficient. Which of...
Assume that markets are weak-form efficient, but not semi-strong form or strong form efficient. Which of the following statements is most correct? a. Each common stock has an expected return equal to that of the overall market. b. Bonds and stocks have the same expected return. c. Investors can expect to earn super-normal returns if they have access to public information. d. Investors may be able to earn super-normal returns if they have access to information that has not been...
Most academic research supports markets as                 efficient. not at all weak form strong form semi-strong...
Most academic research supports markets as                 efficient. not at all weak form strong form semi-strong form
Which of the following is inconsistent with the concept of semi-strong efficient markets? A. A diner...
Which of the following is inconsistent with the concept of semi-strong efficient markets? A. A diner in New York City restaurant overhears two men at the next table talking about a merger between their two firms and earns higher profits by purchasing stock based on this information. B. An investor observes that the bonds of an airline that has filed for bankruptcy are selling for an extremely low price and decides to purchase some of the bonds. Fortunately, the airline...
If markets are semi-strong form efficient, do value stocks affirm or contradict the CAPM? Be specific...
If markets are semi-strong form efficient, do value stocks affirm or contradict the CAPM? Be specific about the relationship between the theory’s predictions and what we observe in the historical data. Hint: think about the betas.
Q1: Representativeness, according to financial economists, leads to: strong form efficient financial markets. stable stock returns...
Q1: Representativeness, according to financial economists, leads to: strong form efficient financial markets. stable stock returns over both short and long periods of time. stock price under reactions to new information. abnormal long-term profits. overreactions in stock returns. Q2: The efficient market hypothesis says that, on average, professional investors will: tend to earn below average rates of returns. outperform investors with inside information. earn a normal rate of return. earn the same rate of return over time regardless of the...
Which of the following is an example that support semi-strong form efficient markets? A.) Post earnings...
Which of the following is an example that support semi-strong form efficient markets? A.) Post earnings announcement drift B.) the return performance of US mutual funds C.) Royal Dutch and Shell Price Ratio of 60/40
The current literature generally concludes that the share markets in the developed countries are semi-strong form...
The current literature generally concludes that the share markets in the developed countries are semi-strong form efficient but not strong form efficient. Which of the following statements is consistent with the finding? Select one: a. Fundamental analysis will not yield any return as the current share price reflects all publicly available information. b. Technical analysis is still useful and gives the investor an advantage over others. c. The current share price reflects both public and private information. d. Insider trading...
8) a) Systematic risk is diversifiable. T or F? b) Strong form efficient markets incorporate all...
8) a) Systematic risk is diversifiable. T or F? b) Strong form efficient markets incorporate all information, except for insider knowledge. T or F?
The Stock Market and Efficient Markets True/False 1. Expectations that are formed solely on the basis...
The Stock Market and Efficient Markets True/False 1. Expectations that are formed solely on the basis of past information are know as rational expectations. 2. The theory of rational expectations argues that optimal forecasts need not be perfectly accurate. 3. An important implication of rational expectation theory is that when there is a change in the way a variable behaves, the way expectations of this variable are formed will change as well. 4. If the optimal forecast of a return...
6) Strong-form efficient markets theory proclaims that ________. A) one can chart historical stock prices to...
6) Strong-form efficient markets theory proclaims that ________. A) one can chart historical stock prices to predict future stock prices such that you can identify mispriced stocks and routinely outperform the market B) one can exploit publicly available news or financial statement information to routinely outperform the market C) current prices reflect the price and volume history of the stock, all publicly available information, and all private information D) current prices reflect the price and volume history of the stock,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT
Active Questions
  • In your travels or readings, what branding strategies, activities or identifiers have major U.S. brands altered...
    asked 3 minutes ago
  • Find the mean of the data summarized in the given frequency distribution. Compare the computed mean...
    asked 3 minutes ago
  • Prove that √3 is irrational. You may use the fact that n2 is divisible by 3...
    asked 5 minutes ago
  • You are the vice president of a 60-bed cardiac hospital. Last year your hospital generated about...
    asked 10 minutes ago
  • A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be...
    asked 13 minutes ago
  • Century National Bank has offices in several cities in the Midwest and the southeastern part of...
    asked 24 minutes ago
  • Constructivist learning approaches and techniques ALL emphasize Select one: a. school based learning activities b. group...
    asked 54 minutes ago
  • 9.1.5 Are there more children diagnosed with Autism Spectrum Disorder (ASD) in states that have larger...
    asked 56 minutes ago
  • A simple pendulum with a length of 2.73 m and a mass of 6.54 kg is...
    asked 1 hour ago
  • Step 3: Complete the following chart by writing what the counter and the totalNumbers value stores...
    asked 1 hour ago
  • The difference between Independent-measures ANOVA and Repeated-measures ANOVA is that the variance estimates for the Repeated-measures...
    asked 1 hour ago
  • Use Pinterest to find a picture for each that best illustrates intrapersonal intelligence and interpersonal intelligence...
    asked 1 hour ago