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High-risk portfolios consist of risky stocks, and low-risk portfolios consist of safe stocks (true or false...

High-risk portfolios consist of risky stocks, and low-risk portfolios consist of safe stocks (true or false )

The weak form EMH holds that the previous history of stock prices is useful for predicting future stock prices.

true or false -explain

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Answer #1

a) True - In a high risk portfolio, the weightage of risky stocks will be comparatively higher as compared to safe stocks and similarly in low risk portfolio, the weightage of safe stocks will be compartively higher.Therefore, the above statement is true considering the fact that high risk portfolio will consist more of risky stocks and low risk portfolio will consist more of safe stocks.

b) False - Weak form EMH states that future securities' prices are random and not influenced by past events. Advocates of weak form EMH believes that all current information is reflected in stock prices and past information has no relationship with current market prices. Therefore, the weak form EMH is not useful for predicting future stock prices.

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