Help
Course Catalog > Portfolios > 500
Portfolios 502: The Efficient Market Theory

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
According to the efficient market theory, mutual funds will underperform the market by the amount of their transaction and management costs.
Choose wisely. There is only one correct answer.
True. Since index funds match the market, the only thing reducing their performance is their costs.
2.
What findings about stocks threw the efficient market theory into question?
Choose wisely. There is only one correct answer.
All of the above. All of these have been found to affect stock prices in ways that called efficiency into question.
3.
Small-cap and large-cap stocks are examples of sub-asset categories.
Choose wisely. There is only one correct answer.
True. They are sub-categories of stocks, and they are described by their capitalizations.
4.
The faster that information is incorporated into a security's price, _______.
Choose wisely. There is only one correct answer.
The more efficient the market. Efficiency depends to a great deal on available information being expressed through a security's price.
5.
In an efficient market, only new information about a security can change its price.
Choose wisely. There is only one correct answer.
True. According to the theory, prices react to new information.