Multi-Source Reasoning - Dichotomous
Incorrect.
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While the author of the first passage may seem to be wary of passive investment, there is no information that would imply that the author would believe active investment is more worthwhile despite its risks. Rather, the author simply contends that there needs to be a balance in both types of investment.
Correct!
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The first author seems skeptical of the long-term safety of passive investment but does not specifically indicate that active investment may be less risky. There isn't any mention of the rewards being worth the risks, so this is not inferable.
Correct!
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The second author implies that active management favors those with superior insights and knowledge of the stock market, while passive management eliminates these decisions for the investor and instead goes by an index. It is inferable based on this information that passive investment would be a safer route for individuals who have a more limited knowledge of the market.
Incorrect.
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Even though the author does not specifically state that passive management is safer, this can be inferred based on the fact that active management is a better choice for those with superior insights and knowledge of the stock market, while, in contrast, passive investment goes by an index and eliminates this decision-making process.
Incorrect.
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Even though the EMH does favor passive investment, and the first author does question the long-term value of this kind of investment, EMH specifically deals with the inability of investors to "beat the market." This may still be true, whether or not passive investment may be detrimental to the market.
Correct!
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While EMH is used as a justification for passive investing, and the first author expresses doubts about the long-term viability of passive investment, the author would not necessarily discredit this. The EMH specifically states that it is virtually impossible to "beat the market," so it's safer to rely on passive investment. The first author does not have to dispute this claim in order to make the contention that passive investment may not be great for the market in the long run.
