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:

Timing Relays

Electromechanical devices that enable timed events in a control circuit, such as delays in switching.

Contactors

Electrically controlled switches used for switching an electrical power circuit, similar to a relay but capable of handling higher currents.

Armatures

The component of an electric machine (like a motor or generator) that carries alternating current and interacts with a magnetic field to produce motion.

Yoke

In electrical engineering, a yoke is the frame that holds or supports magnetic core materials in devices like transformers or some types of motors, contributing to the magnetic circuit's path.