If the securities market is efficient,an investor need only throw darts at the stock pages to pick securities and be just as well off as they would be with a professionally-developed portfolio.This statement is:
A)true because there would be no significant difference in risk and return.
B)true because in an efficient stock market all portfolios earn the market rate of return.
C)false because professionals guarantee higher returns given the same level of risk.
D)false because investors may not hold a desirable risk-return combination.
E)false because the markets are controlled by the institutional investors.

Question

Quizplus · Accepted Answer

This statement is false because even in an efficient market, there may be differences in risk and return among securities. While an investor could randomly select securities, they may not necessarily end up with a desirable risk-return combination. Professional portfolio managers may be able to construct a portfolio with a better balance of risk and return based on their expertise and analysis. However, there is no guarantee that a professionally-developed portfolio will outperform a randomly selected portfolio in an efficient market.

If the Securities Market Is Efficient,an Investor Need Only Throw