Q1:

Representativeness, according to financial economists, leads to:

• strong form efficient financial markets.

• stable stock returns over both short and long periods of time.

• stock price under reactions to new information.

• abnormal long-term profits.

• overreactions in stock returns.

Q2:

The efficient market hypothesis says that, on average, professional investors will:

• tend to earn below average rates of returns.

• outperform investors with inside information.

• earn a normal rate of return.

• earn the same rate of return over time regardless of the risk assumed.

• tend to outperform most market participants.