The stock market follows the efficient markets hypothesis

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Reference no: EM131008012

Shen and Rosa are building their portfolios. Shen purchases shares in a mutual fund and pays fees to a manager who actively manages the mutual fund's portfolio. He does so because he believes that hte manager can identify inexpensive stocks that will rise in value. Rosa is not convinced. She buys shares in an index fund - a type of mutual fund that simply buys all of the stocks in a given stock index rather than actively managing a portfolio. Shen builds his portfolio on the supposition that:

a) The stock market follows the efficient markets hypothesis

b) Stock prices follow a random walk

c) Stock analysts can use fundamental analysis to identify undervalued stocks

Reference no: EM131008012

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