Question

The efficient market hypothesis suggests which of the following (I) investors should not try to outguess...

The efficient market hypothesis suggests which of the following

(I) investors should not try to outguess the market by constantly buying and selling securities.

(II) investors do better on average if they adopt a “buy and hold” strategy.

(III) Investors can earn abnormal profits by using past trading patterns of stocks.

A.) (I) and (II)

B.) (I) and (III)

c.) all of the above are sensible strategies.

d.) (II) and (III)

Homework Answers

Answer #1

According to the efficient market hypothesis, all the information is already reflected in the share price of the stock. The investors cannot make abnormal profits by constantly buying and selling securities. Hence, investors should not try to outguess the market by constantly buying and selling securities. Alos, investors do better on average if they adopt abuy and hold strategy. The correct option is-

(I) AND (II)

Do leave an upvote if you find this hepful. In case of any doubt please let me know in the comment section.

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
(I) The efficient market hypothesis suggests that allocating your funds in the financial markets on the...
(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...
If the stock market is at least weak form efficient, then price changes should allow investors...
If the stock market is at least weak form efficient, then price changes should allow investors to earn abnormal returns should follow patterns should go up if the price went up the day before should be random
) Which of the following causes a market to be weak-form efficient? Select one: a. Investors...
) Which of the following causes a market to be weak-form efficient? Select one: a. Investors analysing past prices and buying shares they think are more likely to increase than decrease, pushing prices up until the share price reflects any information contained in the pattern of past prices. b. Investors analysing past prices and selling shares they think are more likely to decrease than increase, pushing prices down until the share price reflects any information contained in the pattern of...
The efficient market hypothesis says that A. market prices reflect underlying asset values. B. individual investors...
The efficient market hypothesis says that A. market prices reflect underlying asset values. B. individual investors should not participate in the financial markets. C. investors should expect to earn abnormal profits. D. financial managers can accurately time stock and bond sales. E. creative accounting can be used to inflate stock prices.
Which of the following statements related to strong and semi-strong market efficiency are true? In a...
Which of the following statements related to strong and semi-strong market efficiency are true? In a semi-strong form efficient market, all past price and trading information (but not all other publicly available information) is fully impounded into current market prices In a strong form efficient market, corporate insiders are not be able to make superior profits to the market through private information In a semi-strong form efficient market, investors using fundamental analysis (but not technical analysis) will be able to...
Which of the following statements are FALSE? The CAPM identifies the market portfolio as the efficient...
Which of the following statements are FALSE? The CAPM identifies the market portfolio as the efficient portfolio. If some security were not part of the efficient portfolio, then every investor would want to own it, and demand for this security would increase causing its expected return to fall until it is no longer an attractive investment. If investors have homogeneous expectations, then each investor will identify the same portfolio as having the highest Sharpe ratio in the economy. The market...
if the stronger version of the efficient market hypothesis is true, so that stock prices reflect...
if the stronger version of the efficient market hypothesis is true, so that stock prices reflect the true fundamental value of the stock, the strategy that most investors should use when investing is to a) invest solely in mutual funds b) follow the tips from the most prominent financial advisors c) continuously buy and sell of stocks d) buy and hold a diversified set of stocks suppose that your investment advisor calls you and tells you that a certain stock...
Which of the following statements is true concerning the efficient market hypothesis? a. Equilibrium rates of...
Which of the following statements is true concerning the efficient market hypothesis? a. Equilibrium rates of return prevail and securities sell at their "fair" value. b. Equilibrium rates of return prevail. c. Firms securities sell at their "fair" value. d. Financial investors cannot earn a positive return.
Which of the following would invalidate the weak form of the efficient market hypothesis? a. Patterns...
Which of the following would invalidate the weak form of the efficient market hypothesis? a. Patterns in price behavior that consistently predict future price movements. b. Market analysis proves useful in discovering investment opportunities. c. Stocks of smaller firms consistently outperform larger firms. d. Shortly before she is arrested, a pharmaceutical company researcher makes a large profit on her company's stock by buying just before a new drug is approved by the Food and Drug Administration.
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...