Security Markets Are Efficient When Each of the Following Exist

question 5

Multiple Choice

Security markets are efficient when each of the following exist except:

• A) security prices follow the leading indicators such as the S&P/TSX Composite very closely.
• B) the markets can absorb large dollar amounts of stock without destabilizing the price.
• C) prices adjust rapidly to new information.
• D) there is a continuous market where each successive trade is made at a price close to the previous trade.

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Definitions:

Unstable

Characterizes a state or condition that lacks consistency, predictability, or emotional steadiness.

Belief Perseverance

A tendency to continue to view an initial assumption as correct despite evidence to the contradictory.

Self-serving Bias

In attribution, the tendency for people to take personal credit for acts that yield positive outcomes and to deflect blame for bad outcomes by attributing them to external causes.

Fundamental Attribution Error

The tendency to overemphasize personality-based explanations for behaviors observed in others while underestimating the influence of situational factors.