Which of the Following Is Not Consistent with the Efficient

question 125

Multiple Choice

Which of the following is not consistent with the efficient market hypothesis?

• A)Stock prices should follow a random walk.
• B)Index funds should typically outperform highly managed funds.
• C)News has no effect on stock prices.
• D)There is little point in spending many hours studying the business pages looking for undervalued stocks.

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Definitions:

Further Innovation

involves the continuous process of making improvements or introducing new methods, ideas, or products beyond current advancements.

Expected-Rate-of-Return Curve

A graph depicting the expected returns on investment as a function of the level of risk.

MB = MC Decision Framework

A decision-making principle where optimal allocation of resources is achieved when marginal benefit equals marginal cost.

Marginal Benefit Element

The heightened sense of satisfaction or value realized by a consumer upon acquiring another unit of a good or service.