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:

Phonetic-fluency Approach

A method in language learning focusing on the ability to recognize and produce the sounds of a language accurately.

Basal Ganglia

Clusters of nuclei in the brain involved in coordinating movement as well as aspects of cognition and emotion.

Visual Cortex

The region of the brain responsible for processing visual information, located in the occipital lobe.

Critical Thinking

The goal of critically examining and assessing a problem to reach a conclusion.