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:

Corporate Social Responsibility

A business approach that contributes to sustainable development by delivering economic, social, and environmental benefits for all stakeholders.

Legal

Pertaining to the laws, regulations, and codes that govern behavior, agreements, and proceedings within a jurisdiction.

Unethical

Acting in a manner that is contrary to what is considered morally right or fair.

International Business

The practice of conducting trade, investment, and business operations that extend beyond the domestic borders of a country, engaging in global markets.