The optimal strategy to pursue when the stock market is perceived to be price inefficient is indexing because it allows the investor to capture the efficiency of the market.

Question

Quizplus · Accepted Answer

If the stock market is perceived to be price inefficient, then actively managed strategies may be more appropriate as they aim to identify mispricings in the market and take advantage of them. Indexing would not capture these potential opportunities and would simply mirror the inefficiencies of the market.

The Optimal Strategy to Pursue When the Stock Market Is