Which Is not an Implication of the EMH

question 40

Multiple Choice

Which is not an implication of the EMH?

• A) To do superior industry or company analysis you must understand the variables that affect returns and do a superior job of estimating these variables.
• B) Aggregate market analysis that involves very detailed analysis of reliable historical economic data should outperform a simple buy-and-hold policy.
• C) A superior analyst is one who can consistently select stocks that provide positive abnormal returns on a risk-adjusted basis.
• D) If a portfolio manager does not have any superior analysts, he/she should consider investing funds in an index fund.
• E) If a portfolio manager has some superior analytical skills, they should be encouraged to concentrate in second tier stocks which have liquidity, but may be neglected.

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Definitions:

Autokinetic Effect

A phenomenon where a still, small point of light in an otherwise dark or featureless environment appears to move, due to involuntary eye movements.

Idiographic Approach

An approach in psychology that focuses on understanding the unique aspects of an individual's personality or behavior.

Personality Goals

The objectives or aims that an individual sets for themselves concerning their personal growth, behaviors, and attitudes, shaping their personality development.

Big Five

A model describing human personality through five broad domains: openness, conscientiousness, extraversion, agreeableness, and neuroticism.