Given That Markets Are Efficient,what Is the Most Logical Explanation

question 122

Multiple Choice

Given that markets are efficient,what is the most logical explanation of the fact that a portfolio manager can outperform the S&P 500 by 5% annually?

• A) The manager is an expert stock selector.
• B) The manager has relied on insider information.
• C) Stocks do not follow a random-walk pattern.
• D) The manager's results have not been adjusted for the riskiness of the portfolio.

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Definitions:

Constrained Resource

A factor or resource in production that limits the output or performance of a process.

Profitability Order

A method of organizing projects or investments based on their profitability or expected return.

Current Profitability

Current profitability is a measure of a company's financial performance in the present, indicating the degree to which its revenues exceed its operational costs.

Variable Selling

Costs that vary directly with the level of sales activity, such as commissions or credit card fees.