Studies of the performance of professionally managed mutual funds find that thes
ID: 2760081 • Letter: S
Question
Studies of the performance of professionally managed mutual funds find that these funds:
A) do not outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding refutes the semistrong form of the efficient market hypothesis.
B) do not outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the semistrong form of the efficient market hypothesis.
C) outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding refutes the semistrong form of the efficient market hypothesis.
D) outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the semistrong form of the efficient market hypothesis.
E) Both outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding refutes the semistrong form of the efficient market hypothesis; and outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the semistrong form of the efficient market hypothesis.
Explanation / Answer
Asnwer is B) do not outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the semistrong form of the efficient market hypothesis.
Since the managers reply primarily on infomatin available publicly, the managers do not consider any other information. This is in concurrence with semi-strong form of efficiency which states that the superior gain can be achieved only if the information other than publicly available is considered.