The efficient markets hypothesis indicates that investors
A) can use the advice of technical analysts to outperform the market.
B) do better on average if they adopt a "buy and hold" strategy.
C) let too many unexploited profit opportunities go by if they adopt a "buy and hold" strategy.
D) do better if they purchase loaded mutual funds.
B
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For the period 1961 to 1969, the Phillips curve for the United States displayed the same shape that A. W. Phillips found for the United Kingdom for the period 1861 to 1913---it was
A) horizontal. B) vertical. C) downward sloping. D) upward sloping.
Explain the relationship displayed on the graph based on a risk level of X. Use the other capital letters on the graph to identify: (a) the average expected return for a risk-free asset; (b) the average expected return for a market portfolio with a risk level of X; (c) the compensation for time preference for a risk-free asset; and (d) the risk premium for the market portfolio’s risk level of X.
