From the perspective of the theory of efficient markets, explain why it may be difficult for professional portfolio managers who have an exceptional year to continuously outperform the market average.
What will be an ideal response?
A professional money manager who has an exceptional year will attract a lot of attention and money. The attention may be in the form of other professional managers who will copy the actions of the successful manager. The additional money will require the manager to put these funds to use which, due to the law of diminishing marginal returns, will also make it more difficult to duplicate the return.
You might also like to view...
Refer to Table 3-4. The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market. If the price of cashews falls from $4 to $2, the market quantity demanded would
A) increase by 36 lbs. B) decrease by 28 lbs. C) increase by 28 lbs. D) decrease by 36 lbs.
Which of the following statements is false?
A. Under an emission tax, a tax is set and then the quantity of permissible pollution is determined. B. Under both emission taxes and tradable pollution permits polluters must pay to pollute. C. One possible approach to dealing with the problem of environmental negative externalities is a policy of tradable pollution permits, also known as cap and trade. D. Under a tradable pollution permits system, a price of pollution is set and then the quantity of permissible pollution is determined based upon that price.
The concept of mean reversion is defined by
a. the tendency of profits to revert to zero b. the tendency of costs to revert to zero c. the tendency of economic profits to revert to zero d. the tendency of profits to revert to negative
A country that grows faster than the rest of the world should find its imports growing faster than its exports.
Answer the following statement true (T) or false (F)