For Markets to Be in Equilibrium,that Is,for There to Be

question 71

Multiple Choice

For markets to be in equilibrium,that is,for there to be no strong pressure for prices to depart from their current levels,

• A) The past realized rate of return must be equal to the expected future rate of return; that is, .
• B) The required rate of return must equal the past realized rate of return; that is, r = .
• C) The expected rate of return must be equal to the required rate of return; that is, = r.
• D) All of the above statements must hold for equilibrium to exist; that is = r = .
• E) None of the above statements is correct.

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Definitions:

Semi-strong Form Efficiency

A form of market efficiency that posits all publicly available information is fully reflected in stock prices, including historical financial data and current news.

Stock Price

Stock Price is the current price at which a share of stock is trading on the market, influenced by various factors including company performance, investor sentiment, and market conditions.

Trading Day

A day on which stock markets are open for trading.

Average Return

The arithmetic mean of a series of returns generated over a period of time.