I was just reading my notes when I started wondering what if we classify stocks into 2 categories today: high growth stocks and low growth stocks and then form 2 groups of stocks that have the same beta - a group of high growth stocks and a group of low growth stocks. Since one basic inveting tenet is that prices appreciate to reflect the earnings power of a stock. Fast growing stocks should therefore outperform the slow growing stocks. So is it true or false that "In an efficient market, the group of high growth stocks is expected to provide a higher expected return than the group of low growth stocks."? I am quite confused and would really appreciate if anyone can make it clear for me...thanks

benn11

The way you put it logically is the way it should work, but stocks are liquid, so what is a high growth stock today might not be so high growth tomorrow.