If the Markets Are Efficient, Then Why Is Asset Allocation

question 39

Multiple Choice

If the markets are efficient, then why is asset allocation still considered important?

• A)because the risk-return relationship must still be considered
• B)because market timing is critical in efficient markets
• C)because individual security selection is the key to the markets being efficient
• D)because asset allocation combines market timing with individual security selection
• E)because the majority of market gains tend to occur only over long periods of time

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Definitions:

Beginning Work

The initial stage or tasks that start a process, often referring to the beginning inventory or work-in-process in manufacturing.

Costs Added

Expenses that have been incurred additionally, often related to production or acquisition of inventory.

Weighted-Average

A calculation method that multiplies each component by a weight reflecting its importance and sums these products to get an average.

Equivalent Units

A concept used in cost accounting to express the amount of work done on partially finished goods in terms of fully finished goods.