If Markets follow the week form of market efficiency, skilled managers using fun

Question

If Markets follow the week form of market efficiency, skilled managers using fundamental analysis should be able to consistently outperform the S&P 500, while managers using technical analysis should not be able to consistently outperform the S&P 500 over time? True/False

Assume markets are semi-strong efficient. About 60% of the 5000+ fund managers consistently underperform the S&p 500 net of fees and transaction costs. The 40% that outperform must have used insider information to achieve such results. True/False

In the strong-form, it’s impossible for stock managers to outperform the S&P 500 in any given year? True/False

If markets are semi-strong efficient, then only the smartest and most skilled fundamental analysts would be able to find bargains and outperform the S&P 500 over time. True/False Investors holding a diversified portfolio will earn a return commensurate with the portfolio’s total risk. True/False

If markets follow the weak form of market efficiency, then all mutual fund managers will outperform the S&P 500. True/False

Microsoft, Apple, Google and Facebook have delivered returns in excess of their CAPM return over time. This is a violation of EMX. True/False

Explanation / Answer

If Markets follow the week form of market efficiency, skilled managers using fundamental analysis should be able to consistently outperform the S&P 500, while managers using technical analysis should not be able to consistently outperform the S&P 500 over time?

Ans: True (Assuming the Weak form of market efficiency, managers using technical analysis should not be able to consistently outperform S&P as past price movement and volume data do not affect the stock price.)

Assume markets are semi-strong efficient. About 60% of the 5000+ fund managers consistently underperform the S&p 500 net of fees and transaction costs. The 40% that outperform must have used insider information to achieve such results.

Ans: False (In semi strong market efficiency all public information is needed to calculate stock's current price which means neither fundamental nor technical analyst have a gains superior to others.

In the strong-form, it’s impossible for stock managers to outperform the S&P 500 in any given year?

Ans: True (Strong form implies market is efficient and no investor is going to profit above average returns if he is given a new information also.)

If markets are semi-strong efficient, then only the smartest and most skilled fundamental analysts would be able to find bargains and outperform the S&P 500 over time.

Ans: False (As price cannot be calculated using past performance an the volume data niether the fundamentalist nor the technical analyst able to achieve aboveaverage returns.)

Investors holding a diversified portfolio will earn a return commensurate with the portfolio’s total risk.

Ans: True

If markets follow the weak form of market efficiency, then all mutual fund managers will outperform the S&P 500.

Ans: True

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