If markets are efficient, which of the following investors should achieve superior returns over time?
A)Investors who choose stocks by throwing darts at a list of stocks in the financial pages of a newspaper
B)Analysts who spend considerable time evaluating the best stocks to buy
C)Mutual fund managers who manage other people's money for a living
D)None of these options.

Question

Quizplus · Accepted Answer

If markets are efficient, all available information is already reflected in stock prices. Therefore, randomly choosing stocks (A) or spending considerable time analyzing stocks (B) will not provide an edge in achieving superior returns. Mutual fund managers who manage other people's money for a living (C) also face difficulties in outperforming the market due to fees and expenses that eat away at returns. Therefore, none of these options should achieve superior returns over time if markets are efficient.

If Markets Are Efficient, Which of the Following Investors Should