According to the EMH (Efficient Market Hypothesis) proposed by Nobel Prize winner Eugene Fama, informationally efficient markets are those in which asset prices reflect new information quickly and rationally. Mark the correct sentence in terms of active vs. passive investments, and efficient vs. inefficient markets.

• a) If we suppose market are efficient, prices should react only to unexpected or surprise events, and passive investments are preferred to active investments because of lower costs.

• b) If we suppose market are efficient, prices should react only to unexpected or surprise events, and active investments are preferred to passive investments as they can outperform on a risk-adjusted basis.

• c) If markets are either efficient or inefficient, passive investment is always preferred to active investment, because they can outperform on a risk-adjusted basis.