The Efficient Market Hypothesis Suggests That

question 46

Multiple Choice

The efficient market hypothesis suggests that

• A) investors should purchase no-load mutual funds, which have low management fees.
• B) investors can use the advice of technical analysts to outperform the market.
• C) investors let too many unexploited profit opportunities go by if they adopt a "buy and hold" strategy.
• D) only A and B of the above are sensible strategies.

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Definitions:

Decision Avoidance

The phenomenon where an individual or group deliberately chooses not to make a decision, often to avoid responsibility or negative outcomes.

Certainty Effect

The tendency for people to overweight outcomes that are certain relative to outcomes that are merely probable.

Entity Theorists

Individuals who believe traits and abilities are fixed and unchangeable.

Incremental Theorists

People who believe that abilities and intelligence can grow and change through effort and experience.