Question

Active management:

	a.	can outperform a passive strategy if markets are strong-work efficient.
	b.	cannot outperform a passive strategy if markets are semi-strong form efficient
	c.	cannot outperform a passive strategy if markets are weak form efficient
	d.	can outperform a passive strategy if markets are semi-strong form efficient

Answer 1

cannot outperform a passive strategy if markets are semi-strong form efficient

If markets are semi-strong-form efficient, then passive portfolio management strategies are most likely to outperform active trading strategies. Costs associated with active trading strategies would be difficult to recover; thus, such active trading strategies would have difficulty outperforming passive strategies on a consistent after-cost basis.

In a weak form efficient, active management will outperform passive management.