Which of the Following Statements Is TRUE of Rational Expectations

question 89

Multiple Choice

Which of the following statements is TRUE of rational expectations?

• A) Rational expectations forecasts are always correct.
• B) For a trader with rational expectations, the expectation of an asset's price equals the optimal price forecast.
• C) If traders have rational expectations, any announcement by a company will have an effect on its stock price, even if the market was already aware of the facts being announced.
• D) If a trader really has rational expectations, he or she will always earn a greater than normal return on his or her financial portfolio.