Final answer:
Professor Tabarrok advises diversifying your portfolio to minimize risks, rather than attempting to pick stocks that will outperform the market, which aligns with standard financial recommendations for diversification in investment.
option a is the correct
Step-by-step explanation:
The advice consistent with Professor Tabarrok's investment recommendation is to diversify your portfolio. According to the information provided, stocks follow a random walk, implying that financial professionals and mutual funds often fail to beat the market average consistently.
This suggests that for the average investor, trying to outguess the market or select the stocks that will perform exceptionally well is highly uncertain and generally not advisable.
Furthermore, diversification is highlighted as a standard financial recommendation, which aligns with the advice to diversify your portfolio. This approach is based on the principle of not putting all your eggs in one basket, thus minimizing individual investment risks. As mutual funds typically invest in a variety of assets, they naturally offer diversification, which can reduce the overall volatility of the portfolio by averaging out the extreme gains and losses across many investments.