For technical trading rules to generate returns that are superior to a buy-and-hold strategy, net of transaction costs, the market would have to be
A) rising.
B) falling.
C) inefficient.
D) overvalued.
E) undervalued.

Question

Quizplus · Accepted Answer

Technical trading rules are based on using past price and volume data to predict future price movements. Therefore, for these trading rules to be successful, the market would have to be inefficient (i.e. not fully reflecting all relevant information). In an efficient market, past price movements are already reflected in current prices, making it difficult for technical trading rules to generate superior returns.

For Technical Trading Rules to Generate Returns That Are Superior