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1.
Which market index tracks 500 of the largest US company stocks?
Standard and Poor's. Standard and Poor's tracks 500 of the largest US company stocks.
2.
What findings threw the efficient market theory into question?
That stocks that are unpopular tend to outperform. Fama and French found that buying stocks that have performed poorly during the past few years led to superior returns over the next few years. In other words, a contrarian investment strategy can lead to better results than a strategy of buying popular stocks.
3.
Index mutual funds attempt to beat the market.
False. Index funds try to match the market.
4.
In an efficient market, investors are actually trading information.
True. Since prices reflect information, in an efficient market, investors are actually trading information.
5.
All possible information about a security is reflected in its price when a market's efficiency is _______.
Strong. The stronger the efficiency, the more likely that a security's price will reflect current information.
