The efficient market hypothesis suggests that
1) professional portfolio managers will outperform the individual investor
2) professional portfolio managers will not outperform the individual investor
3) professional portfolio managers will consistently outperform the market
4) professional portfolio managers will not consistently outperform the market

Question

The efficient market hypothesis suggests that​
1) professional portfolio managers will outperform the individual investor
2) professional portfolio managers will not outperform the individual investor
3) professional portfolio managers will consistently outperform the market
4) professional portfolio managers will not consistently outperform the market

Quizplus · Accepted Answer

The efficient market hypothesis argues that financial markets are highly efficient and all available information is immediately reflected in market prices. Therefore, it is difficult for professional portfolio managers to consistently outperform the market. This means that choice 3 is incorrect, and choice 4 is correct. Additionally, the efficient market hypothesis suggests that individual investors cannot use their superior analysis to outperform the market, as there are no inefficiencies to exploit. Therefore, choice 1 is also incorrect and choice 2 is correct.

The Efficient Market Hypothesis Suggests That​

The Efficient Market Hypothesis Suggests That