An Efficient Stock Market Means That

question 267

Multiple Choice

An efficient stock market means that:

• A)it is difficult to outperform the market, since stock prices convey all relevant public information about a company.(True
• Answer )Correct
• B)traders with inside information cannot even outperform market averages.
• C)new information is slowly reflected in stock prices.
• D)All of the answers are correct.

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Definitions:

Capital Structure

The mix of different forms of external financing used by a company, including debt, equity, and hybrid securities.

Tax Shield

The decrease in income tax liability achieved by subtracting permissible deductions like mortgage interest or depreciation from one's taxable income.

Capital Structure

The assortment of loans and equity a firm leverages to finance its daily workings and growth aspirations.

Legal Obligation

A duty enforced by law that requires an entity or individual to perform or refrain from certain actions.