# Underperforming Investment Strategy

Not what you're looking for?

It was stated that under Weak-Form EMH you cannot design an investment strategy which "beats the market" (gives you higher return than average market

return, given the riskiness), if such a strategy is based only on analyzing past price movements. Is it possible to design an investment strategy, based on past price movements, which systematically underperforms? By underperforms it is meant that its expected return is lower than average market return on portfolios with the same variance.

Please provide mathematical proof if possible

##### Purchase this Solution

##### Solution Summary

Is it possible to design an investment strategy, based on past price movements, which systematically underperforms? By underperforms it is meant that its expected return is lower than average market return on portfolios with the same variance.

##### Solution Preview

It was stated that under Weak-Form EMH you cannot design an investment strategy which "beats the market" (gives you higher return than average market

return, given the riskiness), if such a strategy is based only on analyzing past price movements. Is it possible to design an investment strategy, based on past price movements, which systematically underperforms? By underperforms it is meant that its expected return is lower than average market return on portfolios with the same variance.

Please provide mathematical proof if possible

Solution:

The random walk theory asserts that price movements will not follow any patterns or trends and that past price movements cannot be used to predict future price movements.

The Weak Form EMH asserts that all past market prices and data are fully reflected in securities prices. In other words, technical ...

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.