Which of the following is not implied by the efficient market hypothesis?most participants assume that the predictions of the model are validmost participants cannot outperform or beat the marketprices move in a random walkin the long run, large companies have higher returns than smallcompaniesmore risk should be rewarded by more return
Question
Which of the following is not implied by the efficient market hypothesis?most participants assume that the predictions of the model are validmost participants cannot outperform or beat the marketprices move in a random walkin the long run, large companies have higher returns than smallcompaniesmore risk should be rewarded by more return
Solution
The statement that is not implied by the Efficient Market Hypothesis (EMH) is "in the long run, large companies have higher returns than small companies". The EMH does not make any assumptions about the size of the company and its relation to returns. It simply states that all available information is already incorporated into a stock's price, so it's impossible to consistently achieve higher than average market returns. The size of the company does not factor into this hypothesis.
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