Evidence supporting semistrong-form market efficiency suggests that investors should ________.
A) rely on technical analysis to select securities
B) rely on fundamental analysis to select securities
C) use a passive trading strategy such as purchasing an index fund or an ETF
D) select securities by throwing darts at the financial pages of the newspaper

Question

Quizplus · Accepted Answer

Semistrong-form market efficiency suggests that all publicly available information is already reflected in the price of a security, making it difficult to outperform the market. Therefore, using a passive trading strategy such as purchasing an index fund or an ETF is the most efficient way to invest. Both technical and fundamental analysis are based on the ability to identify undervalued securities, which goes against the idea of a market being efficient. Throwing darts at financial pages is not a sound strategy for selecting securities.

Evidence Supporting Semistrong-Form Market Efficiency Suggests That Investors Should ________