Several investment analysts claim that they can consistently achieve better returns on their portfolios compared to the overall market by investing in stocks they believe are undervalued. However, classical economic theory introduces the 'efficient market hypothesis', which suggests that stock prices reflect all available public information about the underlying assets. If the efficient market hypothesis holds true, then it should be expected that_____________.

Answer Choices

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(A) investment analysts will drive up the prices of certain stocks beyond their actual worth due to competition

(B) investment analysts rely on confidential information, which is illegal, to outperform the market

(D) based on public information alone, it is not possible to accurately categorize stocks as undervalued or overvalued compared to the market

Correct

(E) some investment analysts will consistently outperform others in generating returns

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Official Explanation

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The efficient market hypothesis (EMH) posits that all available information is already reflected in stock prices, meaning that it is impossible to consistently achieve higher returns than the market average based solely on public information.…

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Comments

SahilJan 31, 2025

Can you explain more?

TarushMar 8, 2025

thanks for the answer

PatrickMay 6, 2024

thank you for sharing

coderMar 7, 2025

Thank for sharing!!!

What this question tests

What it tests

Whether you can complete the last sentence of an argument in a way that is logically consistent with it.

Common trap

Choosing an option that sounds plausible but contradicts the argument or introduces new information.