Strong-Form Efficiency Implies That Mutual Fund Managers Should

question 27

Multiple Choice

Strong-form efficiency implies that mutual fund managers should

• A)buy the index that maximizes diversification and minimizes the cost of managing portfolios.
• B)actively seek underperforming stocks and buy them.
• C)generally earn superior returns each year.
• D)attempt to earn superior returns by using technical analysis.

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Definitions:

Durability

The quality of being able to withstand wear, pressure, or damage; the ability of a product or material to last a long time without significant degradation.

Proprietary Barriers

Restrictions established through the ownership of patents or copyrights that limit competition.

Bootstrapping

A method of financing a startup or new venture by using personal funds or operating revenues rather than seeking external investment.

Competitive Advantages

Unique attributes or capabilities that allow an organization to outperform its competitors.