Which of the Following Statements About Market Efficiency Is Generally

question 46

Multiple Choice

Which of the following statements about market efficiency is generally considered to be true?

• A) For inefficient markets, security prices will rapidly reflect new information.
• B) It is easy to forecast the direction of future security price changes in the short run.
• C) Short-run price changes occur independent of information coming to the market.
• D) On average, most stocks are mispriced.
• E) In the absence of legal constraints, investors with inside information will be able to earn excess returns.

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Definitions:

Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded, leading to market balance.

Equilibrium Quantity

The quantity of goods or services bought and sold at the equilibrium price in a market.

Market

A place or arena where buyers and sellers meet to exchange goods, services, or information, often determining the prices through the forces of supply and demand.

Sellers

Individuals or entities that offer goods or services for sale.