If the Securities Market Is Efficient an Investor Need Only

question 3

Multiple Choice

If the securities market is efficient an investor need only throw darts at the stock pages to pick securities and be just as well off.

• A) This is true because there are no differences in risk and return.
• B) This is true because in an efficient stock market prices do not fluctuate.
• C) This is false because professional portfolio managers prefer to generate commissions.
• D) This is false because investors may not hold a desirable risk-return combination in their portfolio.
• E) This is false because the markets are controlled by the institutional investors.

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Definitions:

Foundation

The base or underlying support for a theory, argument, or physical structure.

Statistical Power

The likelihood that a study will detect an effect when there is an effect to be detected, reducing the risk of a Type II error.

Beta Level

The probability of making a Type II error in hypothesis testing, which occurs when a test fails to reject a false null hypothesis.

Participant Number

The count of individuals participating in a research study.