If the Efficient Market Hypothesis Holds, Investors Should Expect

question 11

Multiple Choice

If the efficient market hypothesis holds, investors should expect:

• A) to earn only a supernormal return.
• B) to receive a high price for their securities.
• C) to always be able to pick stocks that will outperform the market averages.
• D) to earn only a normal return; and to receive a fair price for their securities.
• E) to receive a fair price for their securities; and to always be able to pick stocks that will outperform the market averages.

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Definitions:

Set Point

The desired or target value for a controlled variable in a control system, against which actual values are compared to determine the need for corrective action.

Proportioning Action

A control method where the output is adjusted in proportion to the difference between the actual value and a setpoint.

Proportional Band

A control parameter in PID controllers that determines the range of proportional action surrounding a setpoint for maintaining system stability.