If the securities market is eﬃcient, an investor need only throw darts at the equity pages to pick securities and be just as well off.
A)This is true because there are no differences in risk and return.
B)This is true because in an eﬃcient stock market prices do not ﬂuctuate.
C)This is false because professional portfolio managers prefer to generate commissions by
Active trading.
D)This is false because investors may not hold a desirable risk-return combination in their
Portfolio.
E)This is false because the markets are controlled by the institutional investors.

Question

Quizplus · Accepted Answer

The statement is false because in an efficient stock market, investors may not hold a desirable risk-return combination in their portfolio. The efficiency of the market does not mean that all securities carry the same risk and return, but rather that prices reflect all available information, making it difficult for investors to outperform the market consistently. Therefore, throwing darts at the equity pages would not be an optimal strategy for an investor trying to achieve a specific risk-return level in their portfolio.

If the Securities Market Is Eﬃcient, an Investor Need Only