Which of the following statements about efficient market hypothesis (EMH), behaviour finance, or efficiently inefficient markets is incorrect? A. EMH implies that security prices reflect information available to investors and traders could not beat the market using an active strategy. B. Behaviour finance argues that asset prices could deviate their intrinsic value for a long period of time. Efficiently inefficient markets are efficient enough that managers can not be compensated for their costs and risks through superior performance. D. • Efficiently inefficient markets are efficient enough that the rewards of investment management after all costs do not encourage entry of new investment or additional capital. E. Active investing can beat the market if the market is inefficient due to investor irrationality and behavioral bias.
Which of the following statements about efficient market hypothesis (EMH), behaviour finance, or efficiently inefficient markets is incorrect? A. EMH implies that security prices reflect information available to investors and traders could not beat the market using an active strategy. B. Behaviour finance argues that asset prices could deviate their intrinsic value for a long period of time. Efficiently inefficient markets are efficient enough that managers can not be compensated for their costs and risks through superior performance. D. • Efficiently inefficient markets are efficient enough that the rewards of investment management after all costs do not encourage entry of new investment or additional capital. E. Active investing can beat the market if the market is inefficient due to investor irrationality and behavioral bias.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:QUESTION 7
Which of the following statements about efficient market hypothesis (EMH), behaviour finance, or efficiently inefficient
markets is incorrect?
A.
EMH implies that security prices reflect information available to investors and traders could not beat the market
using an active strategy.
B.
Behaviour finance argues that asset prices could deviate their intrinsic value for a long period of time.
C. Efficiently inefficient markets are efficient enough that managers can not be compensated for their costs and risks
through superior performance.
• Efficiently inefficient markets are efficient enough that the rewards of investment management after all costs do
not encourage entry of new investment or additional capital.
O E.
Active investing can beat the market if the market is inefficient due to investor irrationality and behavioral bias.
Expert Solution
Step 1
Efficient Market Hypothesis (EMH) refers to a hypothesis that states the prices of securities rapidly and quickly shows available information about securities. The theory suggests that stock prices indicate all relevant information; thus leaving no opportunity to earn excess profits by investing
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