The semi strong form of the efficient market theory

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Reference no: EM132012254

What would happen to market efficiency if all investors attempted to follow a passive strategy?

Market efficiency will stay the same.

Market efficiency will decrease.

Not enough information to answer the question.

Market efficiency will increase.

Which of the following statements would provide support against the semistrong form of the efficient market theory?

Trend (technical) analysis is worthless in forecasting stock prices.

You cannot make abnormal profits by buying stacks after an announcement of strong annual earnings.

About 50% of pension funds outperform the market in any year.

Low P/E stocks tend to have positive abnormal returns over the long run.

Reid Aerial Systems has never missed or reduced a dividend payment in its 50-year history. If you believe the markets are efficient this information should have NO effect on your likelihood of adding this stock to your portfolio.

True

False

Read the statement below and check ALL of the answers that are applicable to the question:

Some individuals contend that professional managers are incapable of continually outperforming the market. Others believe that the professional managers are able to continually outperform the market. What are the assumptions in support of passive portfolio management?

Diversification

Liquidity risks

Market inefficiency

Informational efficiency

Reference no: EM132012254

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