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.
A market index represents the entire market.
Choose wisely. There is only one correct answer.
False. A market index represents a segment of the entire market.
3.
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.
4.
In an efficient market, _______.
Choose wisely. There is only one correct answer.
All of the above. These are all essential if a market is to be efficient.
5.
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.