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:

Fortune 500

A list annually compiled by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years.

Global Scale

A perspective or measurement tool that considers the entire world or major regions of it.

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The tendency to present oneself in an overly favorable manner, often seen in social or evaluative situations.

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The practice of intentionally displaying oneself in a positive light to others to enhance one's social image or influence perceptions.