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Portfolios 502: The Efficient Market Theory

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1.
Index mutual funds attempt to beat the market.
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False. Index funds try to match the market.
2.
In an efficient market, investors are actually trading information.
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True. Since prices reflect information, in an efficient market, investors are actually trading information.
3.
All possible information about a security is reflected in its price when a market's efficiency is _______.
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Strong. The stronger the efficiency, the more likely that a security's price will reflect current information.
4.
What findings about stocks threw the efficient market theory into question?
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All of the above. All of these have been found to affect stock prices in ways that called efficiency into question.
5.
Which market index tracks 500 of the largest US company stocks?
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Standard and Poor's. Standard and Poor's tracks 500 of the largest US company stocks.