The efficient market hypothesis says that on average managers will:
A)tend to earn below average rates of returns.
B)not be able to earn an excess return.
C)outperform investors with inside information.
D)tend to outperform most market participants.
E)earn the same rate of return over time regardless of the risk assumed.

Question

Quizplus · Accepted Answer

The efficient market hypothesis states that all information is reflected in a stock's price, so there is no way for managers to consistently earn excess returns by using their skill or knowledge. Therefore, they will not be able to earn an excess return, which is the answer choice B.

The Efficient Market Hypothesis Says That on Average Managers Will