Question

The efficient market hypothesis suggests that

1-proff. portfolio managers will outperform the individual investor

2-proff. portfolio managers will not outperform the individual investor

3-proff. portfolio managers will consistently outperform the market

4-proff. portfolio managers will not consistently outperform the market

which 2 are correct? .

A-1&3

B-2 & 3

C-1 & 4

D-2 & 4

Answer 1

According to the EMH (efficient market hypothesis) statement 2 & 4 are correct, i.e., option D is correct.

The professional managers will not outperform individual investors as the professional managers can seldom outperform the market using active fund management and the individuals by investing the funds passively would generally get the same return as the professional managers.

Due to all the information being reflected in the prices, the securties are always correctly priced and this do not let the professional portfolio managers to consistently outperform the market based on technical and fundamental analysis.