In 1990, the performance of the pros was abnormally poor, because 90% of all equity mutual funds underperformed a submissively handled index funds. To determine : How does the given fact tolerate on the problems of market efficiency . Introduction: Index funds: It is a type of mutual fund with a portfolio is constructed to match or track the elements of a market index such as, S&P 500. The index funds offers wide market exposure, lessen operating expenditure and reduced portfolio turnover.

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Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 22, Problem 6CRCT

Summary Introduction

Case summary:

In 1990, the performance of the pros was abnormally poor, because 90% of all equity mutual funds underperformed a submissively handled index funds.

To determine: How does the given fact tolerate on the problems of market efficiency.

Introduction:

Index funds:

It is a type of mutual fund with a portfolio is constructed to match or track the elements of a market index such as, S&P 500. The index funds offers wide market exposure, lessen operating expenditure and reduced portfolio turnover.

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Question 5 a) “If markets are semistrong-form efficient, investors would only adopt passive investment strategies and buy into an index fund, rather than active strategies where they would have a portfolio manager select the components of their portfolios and seek for mispriced equities.” Explain if you agree with this statement, in no more than 150 words.

Answer 2

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Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 22, Problem 6CRCT

Summary Introduction

Case summary:

In 1990, the performance of the pros was abnormally poor, because 90% of all equity mutual funds underperformed a submissively handled index funds.

To determine: How does the given fact tolerate on the problems of market efficiency.

Introduction:

Index funds:

It is a type of mutual fund with a portfolio is constructed to match or track the elements of a market index such as, S&P 500. The index funds offers wide market exposure, lessen operating expenditure and reduced portfolio turnover.

Expert Solution & Answer

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Answer 3

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 22, Problem 6CRCT

Summary Introduction

Case summary:

In 1990, the performance of the pros was abnormally poor, because 90% of all equity mutual funds underperformed a submissively handled index funds.

To determine: How does the given fact tolerate on the problems of market efficiency.

Introduction:

Index funds:

It is a type of mutual fund with a portfolio is constructed to match or track the elements of a market index such as, S&P 500. The index funds offers wide market exposure, lessen operating expenditure and reduced portfolio turnover.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 22, Problem 6CRCT

Summary Introduction