Question

(I) The efficient market hypothesis suggests that allocating your funds in the financial markets on the advice of a financial analyst is not likely to prove superior to a strategy of making selections by throwing darts at the financial page.

(II) Most actively managed mutual funds, when compared to a market index such as the Wilshire 5000, provide higher returns to investors than the market index.

Group of answer choices

(I) is false, (II) true.

Both are false.

Both are true.

(I) is true, (II) false.

Explain your answer

Answer 1

In the Efficient market, all the strategies related to outperformance of the market by better selection of fund or using of the advice of a fund manager or active management of mutual fund will never help in making a higher rate of return than the actual market rate of return because index rate of return is the highest rate of return and Efficient market always advocates for passive investment.

Hence correct answer will be option (D) (I) is true, (II) False