Which of the Following Is an Implication of Efficient Markets

question 27

Multiple Choice

Which of the following is an implication of efficient markets?

• A)An investor should employ a buy-and-hold strategy when investing to minimize transaction costs.
• B)The only way an investor can expect to increase his expected return is to increase the risk of his portfolio.
• C)Only institutional investors or very wealthy individuals can expect to earn excess returns.
• D)Both A and B are true statements.

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Definitions:

Liquidating Dividend

A payment made by a corporation to its shareholders during its liquidation, distributing the remaining assets.

Regular Cash Dividend

Cash payment made by a firm to its owners in the normal course of business, usually made four times a year.

Ex-Dividend Date

The cutoff date after which new buyers of a stock will not be entitled to receive the next declared dividend.

Shareholders

Individuals or entities that legally own one or more shares of stock in a joint-stock company.