True or False: This fact violates the efficient markets hypothesis because the efficient markets hypothesis argues that it is impossible to earn above-market returns.

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Catherine Strong

Business

6 January, 17:51

True or False: This fact violates the efficient markets hypothesis because the efficient markets hypothesis argues that it is impossible to earn above-market returns.

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Alexandria Ferguson · Answer 1

True

Explanation:

It is true that this fact violates the efficient markets hypothesis because the efficient markets hypothesis argues that it is impossible to earn above-market returns.

Efficient market hypothesis holds that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.

Hence since it is impossible to beat the market, it is impossible to earn above-market returns.