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Portfolios 502: The Efficient Market Theory

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1.
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.
2.
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.
3.
According to the efficient market theory, mutual funds will underperform the market by the amount of their transaction and management costs.
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True. Since index funds match the market, the only thing reducing their performance is their costs.
4.
In an efficient market, _______.
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All of the above. These are all essential if a market is to be efficient.
5.
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.