CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Evidence supporting the use of fundamental analysis as a way to earn above-average risk-adjusted returns includes ______.

A. the fact that private money managers using fundamental analysis earn returns superior to those who do not
B. the continued widespread use of fundamental analysis as a forecasting tool
C. several balance sheet-based indicators that continue to have forecasting ability
D. studies documenting very weak independence in stock returns
Correct Answer: C

Fundamental analysis is based on the use of public information. Tests using P/E ratios, market-to-book ratios, etc. appear to have predictive ability. Tests looking at professional money managers indicate that they do not earn excess risk-adjusted returns. Widespread use of fundamental analysis is not evidence of it adding value. Statistical independence has nothing to do with fundamental analysis.

User Contributed Comments 1

User Comment
kalps Fundamental analysis use Balance sheet ratios such as P/E market/bokk value..... to earn above average risk adjusted returns
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