The Efficient Market Hypothesis (EMH) suggests that all available information is already incorporated into the price of securities, and thus, it is impossible to consistently achieve returns in excess of average market returns on a risk-adjusted basis.

Given this, the EMH would suggest that investors should:

B) Adopt a passive portfolio management strategy.

This is because, according to the EMH, since all information is already reflected in the prices of securities, active management (option A) which involves picking undervalued stocks or timing the market, would not consistently yield higher returns than the market average. Similarly, technical analysis (option C) and fundamental analysis (option D), which involve studying past trends and financial statements respectively to predict future price movements, would also not be effective according to the EMH, as all this information is already reflected in current prices.

Therefore, a passive strategy, which involves buying a broad market index fund and holding it over the long term, would be the most appropriate strategy according to the EMH.

Question

The Efficient Market Hypothesis (EMH) suggests that all available information is already incorporated into the price of securities, and thus, it is impossible to consistently achieve returns in excess of average market returns on a risk-adjusted basis.

Given this, the EMH would suggest that investors should:

B) Adopt a passive portfolio management strategy.

This is because, according to the EMH, since all information is already reflected in the prices of securities, active management (option A) which involves picking undervalued stocks or timing the market, would not consistently yield higher returns than the market average. Similarly, technical analysis (option C) and fundamental analysis (option D), which involve studying past trends and financial statements respectively to predict future price movements, would also not be effective according to the EMH, as all this information is already reflected in current prices.

Therefore, a passive strategy, which involves buying a broad market index fund and holding it over the long term, would be the most appropriate strategy according to the EMH.

Knowee AI · Accepted Answer

The Efficient Market Hypothesis (EMH) suggests that all available information is already incorporated into the price of securities, and thus, it is impossible to consistently achieve returns in excess of average market returns on a risk-adjusted basis.

Given this, the EMH would suggest that investors should:

B) Adopt a passive portfolio management strategy.

This is because, according to the EMH, since all information is already reflected in the prices of securities, active management (option A) which involves picking undervalued stocks or timing the market, would not consistently yield higher returns than the market average. Similarly, technical analysis (option C) and fundamental analysis (option D), which involve studying past trends and financial statements respectively to predict future price movements, would also not be effective according to the EMH, as all this information is already reflected in current prices.

Therefore, a passive strategy, which involves buying a broad market index fund and holding it over the long term, would be the most appropriate strategy according to the EMH.

The Efficient Market Hypothesis (EMH) suggests that investors should __________.A) Adopt an active portfolio management strategy. B) Adopt a passive portfolio management strategy.C) Use technical analysis as the basis for investment. D) Use fundamental analysis as the basis for investment.

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