If the Efficient Market Hypothesis Holds,investors Should Expect

question 42

Multiple Choice

If the efficient market hypothesis holds,investors should expect:

• A)to always be able to pick stocks that will outperform the market averages.
• B)to receive a fair price for their securities.
• C)to earn only a normal return.
• D)Both A and B.
• E)Both B and C.

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Definitions:

Securities

Financial instruments that represent some form of financial value such as stocks, bonds, or options, which can be bought and sold.

"Go Public"

The process by which a privately-held company offers its shares for sale to the public for the first time, typically through an initial public offering (IPO).

Red Herring

A prospectus for the sale of a security not yet approved by the SEC. Stamped with the word preliminary in red letters.

Commerce Department

A department of the federal government dedicated to promoting economic growth, supporting business, and managing trade.