Historical returns support which one of the following statements?
A) Financial markets are highly inefficient as suggested by behavioral finance.
B) Professional money managers tend to outperform the Vanguard 500 index fund about 60 percent of the time on average.
C) The longer the time span, the more likely a professional money manager will outperform an index fund, such as the S&P 500.
D) Historical data supports the statement that arbitrage results in a 100 percent totally efficient market.
E) The financial markets appear to be highly efficient because, on average, they outperform professional money managers.

Question

Quizplus · Accepted Answer

Historical returns show that, on average, financial markets outperform professional money managers. This supports the statement that financial markets are highly efficient in terms of price discovery and information dissemination. This also implies that actively managed funds tend to underperform passive index funds, such as the S&P 500. Therefore, Option E is the correct choice.

Historical Returns Support Which One of the Following Statements