The Efficient Market Hypothesis Says That on Average Managers Will

question 5

Multiple Choice

The efficient market hypothesis says that on average managers will:

• A)tend to earn below average rates of returns.
• B)not be able to earn an excess return.
• C)outperform investors with inside information.
• D)tend to outperform most market participants.
• E)earn the same rate of return over time regardless of the risk assumed.

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Definitions:

Coefficient

A numerical or constant quantity placed before and multiplying the variable in an algebraic expression, often indicating the slope in linear equations or the degree of variation in correlation.

Unit Change

A measure indicating the change in outcome associated with a one-unit change in an independent variable within a statistical model.

Stepwise Regression

A procedure in regression analysis that automatically chooses the variables to be used for prediction.

Forward Selection

A stepwise regression approach where variables are sequentially added to the linear model based on their statistical significance in explaining the outcome variable.