CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Tests of the strong form of the EMH suggest that ______

A. the EMH holds under all conditions.
B. corporate insiders and stock exchange specialists may possess knowledge allowing them to earn above-average risk-adjusted returns.
C. most professional money managers earn above-average risk-adjusted returns.
D. only those engaging in insider trading consistently earn above-average risk-adjusted returns.
Correct Answer: B

We have evidence that markets may not be completely efficient in the strong form. However, in order to be able to take advantage of this fact, one must be highly capitalized, have fast access to the markets and excellent information processing ability, and a relatively low cost of transacting. Thus insiders and specialists are in the best position to profit from these inefficiencies.

User Contributed Comments 1

User Comment
johntan1979 Weak support for strong form.
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