Question: Refer to Theory in Practice 4 1 in Section 4 2 2 Required

Refer to Theory in Practice 4.1 in Section 4.2.2.

a. Use efficient securities market theory to explain how “dart throwing” may be a desirable investment strategy.
b. Explain Prof. Malkiel’s argument that risk differences may be driving the superior aver-age returns earned by the pros and the Dow Jones index. How would you determine whether risk differences were affecting the results?
c. Explain another possible reason, not mentioned by Prof. Malkiel, for the superior returns earned by the pros.

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