Which One of the Following Best Describes the Current Understanding

question 49

Multiple Choice

Which one of the following best describes the current understanding of market efficiency?

• A) The market tends to overreact to new information in a manner which can be used to earn abnormal returns.
• B) Markets under-react to unanticipated events in a manner which can be used to earn excess returns.
• C) The market appears to be highly inefficient.
• D) Short-term market movements are difficult, if not impossible, to predict accurately.
• E) Markets tend to react slowly to unanticipated announcements.

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Definitions:

Business Cartels

Groups of independent businesses that regulate production, pricing, and marketing by agreement among members to limit competition.

Minimum Wage

Legislation requiring that workers be paid at least the stated minimum hourly rate of pay.

Tax Rates

The percentage at which an individual or corporation is taxed on their income or profits.

Economic Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in GDP, real income, employment, industrial production, and wholesale-retail sales.