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:

Sales Units

The number of individual items or units a business sells within a specific period.

Variable Expenses

Expenses that change in proportion to the activity of a business such as production volume or sales.

Fixed Expenses

Costs that do not change in total despite fluctuations in the volume of goods or services produced or sold.

Break-Even Point

The point at which total costs and total revenue are equal, meaning no profit or loss is generated.