medium · GMAT Verbal
An investment firm back-tested a new stock-picking algorithm on technology-sector stocks during a single three-year bull-market period and found the algorithm's returns were eight percentage points above the sector benchmark. The firm concludes that deploying the algorithm across all sectors and all market conditions going forward will similarly beat benchmarks.
Which of the following, if true, most strengthens the firm's conclusion that the algorithm will beat benchmarks across all sectors and market conditions going forward?
- When retested on healthcare and industrial stocks over the same span, including a downturn, the algorithm again beat its benchmarks similarly.
- The algorithm relies on a machine-learning model trained on twenty years of historical price, volume, and macroeconomic data drawn from many world markets.
- Several competing investment firms have independently developed similar rules-based stock-picking algorithms of their own in recent years.
- The algorithm can generate a full recommended portfolio in under one second, far faster than the firm's analysts could evaluate the same stocks by hand.
- Technology-sector stocks account for a noticeably larger share of major market indexes now than they did a decade ago.
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