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.
A) This is true because there are no differences in risk and return.
B) This is true because in an efficient stock market prices do not fluctuate.
C) This is false because professional portfolio managers prefer to generate commissions by active trading.
D) This is false because investors may not hold a desirable risk-return combination in their portfolio.
E) This is false because the markets are controlled by the institutional investors.

Question

Quizplus · Accepted Answer

The statement is false because an investor may not hold a desirable risk-return combination in their portfolio even if the securities market is efficient. Efficient market theory assumes that all available information is fully reflected in the prices. However, investors may have different risk preferences and investment goals, and therefore, their optimal portfolios may differ. Throwing darts at stock pages would not ensure that an investor's portfolio has the desired risk-return characteristics.

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