Historical returns support which one of the following statements?
A) Financial markets are highly ineﬃcient as suggested by behavioral ﬁnance.
B) Professional money managers tend to outperform the Vanguard 500 index fund about 55 percent of the time on average.
C) The longer the time span, the more apt a professional money manager is to outperform an index fund, such as the S&P 500.
D) Historical data supports the statement that arbitrage is unlimited and results in a totally eﬃcient market.
E) The ﬁnancial markets appear to be eﬃcient because, on average, they outperform professional money managers.

Question

Quizplus · Accepted Answer

Historical returns suggest that on average, the financial markets outperform professional money managers. This supports the idea that the financial markets are efficient, as they incorporate all available information into prices and make it difficult for managers to consistently beat them. The other statements are unsupported or contradicted by historical data.

Historical Returns Support Which One of the Following Statements