Solution Found!
According to the efficient markets hypothesis, a. excessive diversification can reduce an investor’s expected portfolio returns. b. changes in stock prices are impossible to predict from public information. c. actively managed mutual funds should generate higher returns than index funds. d. the stock market moves based on the changing animal spirits of investors.
Chapter 27, Problem 8(choose chapter or problem)
According to the efficient markets hypothesis,
a. excessive diversification can reduce an investor’s expected portfolio returns.
b. changes in stock prices are impossible to predict from public information.
c. actively managed mutual funds should generate higher returns than index funds.
d. the stock market moves based on the changing animal spirits of investors.
Questions & Answers
QUESTION:
According to the efficient markets hypothesis,
a. excessive diversification can reduce an investor’s expected portfolio returns.
b. changes in stock prices are impossible to predict from public information.
c. actively managed mutual funds should generate higher returns than index funds.
d. the stock market moves based on the changing animal spirits of investors.
ANSWER:Step 1 of 2
Efficient market hypothesis: The efficient market hypothesis refers to the asset price that reflects on the data. The hypothesis assumes that the investors are rational and they trade randomly.