The fact that the majority of stock mutual funds cannot outperform the stock market averages is consistent with:
A) the no free lunch principle.
B) the risk-return trade-off principle.
C) the efficient markets hypothesis.
D) the active trading hypothesis.

Question

Quizplus · Accepted Answer

The fact that the majority of stock mutual funds cannot outperform the stock market averages is consistent with the efficient markets hypothesis, which suggests that all publicly available information is already reflected in stock prices making it difficult to outperform the market consistently. The other principles listed, such as the no free lunch principle, risk-return trade-off principle, and active trading hypothesis, do not directly relate to the fact that most mutual funds cannot beat the market averages.

The Fact That the Majority of Stock Mutual Funds Cannot