Tests of market efficiency have focused on
A)the mean-variance efficiency of the selected market proxy.
B)strategies that would have provided superior risk-adjusted returns.
C)results of actual investments of professional managers.
D)strategies that would have provided superior risk-adjusted returns and results of actual investments of professional managers.

Question

Quizplus · Accepted Answer

Tests of market efficiency have focused on both strategies that would have provided superior risk-adjusted returns and results of actual investments of professional managers to determine whether markets are efficient. By comparing the actual returns of professional managers to those that could have been achieved through a passive investment strategy, researchers can assess whether markets are efficient in terms of providing excess returns to those who engage in active management. Additionally, studies of historical market data can reveal whether strategies based on market anomalies or other factors consistently provide above-average returns, which would indicate the market is not efficient.

Tests of Market Efficiency Have Focused on