If the Securities Market Is Efficient,an Investor Need Only Throw

question 53

Multiple Choice

If the securities market is efficient,an investor need only throw darts at the stock pages to pick securities and be just as well off.

• A) This is true because there are no differences in risk and return.
• B) This is true because in an efficient stock market prices do not fluctuate.
• C) This is false because professional portfolio managers prefer to generate commissions by active trading.
• D) This is false because investors may not hold a desirable risk-return combination in their portfolio.
• E) This is false because the markets are controlled by the institutional investors.

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Definitions:

Social Loafing

The inclination of people to put in less effort when they are part of a group compared to when they work by themselves.

Groupthink

A phenomenon that occurs within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Normative Social Influence

The influence of other people that leads an individual to conform in order to be accepted and liked by the group, even if it means going against their own beliefs or behaviors.

Persuasive Arguments Theory

A theory that focuses on how the quality and the quantity of arguments can influence attitude change and persuasion.