The number and availability of discount brokers has grown rapidly since the mid-1970s. The efficient markets hypothesis predicts that people who use discount brokers
A)will likely earn lower returns than those who use full-service brokers.
B)will likely earn about the same as those who use full-service brokers,but will net more after brokerage commissions.
C)are going against evidence suggesting that full-service brokers can help outperform the market.
D)are likely to outperform the market by a wide margin.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis suggests that it is difficult to consistently outperform the market, regardless of whether one uses a discount or full-service broker. However, using a discount broker can save on brokerage commissions, allowing investors to earn about the same returns as those who use full-service brokers but with lower expenses, resulting in a higher net return.

The Number and Availability of Discount Brokers Has Grown Rapidly