An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT
A) new information is predictable and therefore already incorporated into the stock prices.
B) new information is by definition unpredictable, thus hard to incorporate into stock prices.
C) actively managed mutual funds typically charge fees of about 1.5%.
D) index funds make no attempt to analyze stocks.

Question

Quizplus · Accepted Answer

The Efficient Market Hypothesis suggests that new information is unpredictable and thus quickly incorporated into stock prices, not predictable as stated in choice A.

An Implication of the Efficient Market Hypothesis Is That It