A. results indicate that past performance by mutual funds is a good indicator of how they will perform in the future.

B. results are inconsistent with the efficient market hypothesis because mutual fund performance is predictable

C. results are inconsistent with the efficient market hypothesis because lower-risk funds earn higher average returns than higher-risk funds.

D. none of the above.

FIGURE 8.8 0.6 Persistence of mutual fund Decile 1 performance. Performance over time of mutual fund groups ranked by initial year performance 0.4 Source: Mark M. Carhart, On Persistence in Mutual Fund Performance," Journal of Finance 52 (March 1997), pp. 57-82. Reprinted by permission of the publisher 0.2 Blackwell Publishing, Inc 0.0 Decile 10 0.2 Formation year +1 Year+2 Years +3 Years +4 Years +5 Years FIGURE 8.8 0.6 Persistence of mutual fund Decile 1 performance. Performance over time of mutual fund groups ranked by initial year performance 0.4 Source: Mark M. Carhart, On Persistence in Mutual Fund Performance," Journal of Finance 52 (March 1997), pp. 57-82. Reprinted by permission of the publisher 0.2 Blackwell Publishing, Inc 0.0 Decile 10 0.2 Formation year +1 Year+2 Years +3 Years +4 Years +5 Years