A portfolio manager who believes that markets are efficient and investors are rational is most likely to use a passive strategy in managing the portfolio.

Question

Quizplus · Accepted Answer

In efficient markets, all available information is already reflected in stock prices, making it difficult to consistently outperform the market through active management. Therefore, a portfolio manager who believes in market efficiency and investor rationality would likely opt for a passive investment strategy, which involves holding a diversified portfolio to match the performance of a market index.

A Portfolio Manager Who Believes That Markets Are Efficient and Investors