If semistrong,or strong,form efficiency exists,then,on average,investors are probably best served by
A)investing based solely on a stock's past performance.
B)avoiding all mutual funds.
C)avoiding the stock market altogether.
D)investing in index funds rather than in actively managed mutual funds.
E)randomly purchasing stocks by just throwing darts.

Question

Quizplus · Accepted Answer

Investing in index funds rather than in actively managed mutual funds is the best option if semistrong or strong form efficiency exists. This is because actively managed funds aim to outperform the market through stock selection, but if the market is efficient, it would be difficult to consistently beat it. Index funds instead aim to replicate the performance of the market, which is likely to be the best option for investors in an efficient market.

If Semistrong,or Strong,form Efficiency Exists,then,on Average,investors Are Probably Best Served