One Important Implication of the Efficient Markets Hypothesis Is That

question 9

Multiple Choice

One important implication of the efficient markets hypothesis is that most investors

• A)should avoid active trading.
• B)can benefit by purchasing high-beta stocks.
• C)should trade actively to help ensure the highest overall gain in their portfolios.
• D)should hold IPO stock issues for the long term.

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Definitions:

Simple Random Sample

A simple random sample of size n from a finite population of size N is a sample selected such that each possible sample of size n has the same probability of being selected.

Probability

An indicator of the probability that a particular event will take place, represented by a numerical value ranging from 0 to 1, with 0 meaning the event cannot happen and 1 meaning the event is certain to happen.

Population

Every individual or item under consideration in a statistical evaluation.

Probability Distribution

A mathematical function that provides the probabilities of occurrence of different possible outcomes in an experiment.