Which Statement Regarding the Efficient Markets Hypothesis Is True

question 1

Multiple Choice

Which statement regarding the efficient markets hypothesis is true?

• A)If the stock market is weak-form efficient, then one cannot outperform the market even if he or she has private information.
• B)If the stock market is semistrong-form efficient, then the expected return on stocks and bonds must be the same.
• C)If the stock market is strong-form efficient, then high beta stocks must have the same expected return as low beta stocks.
• D)Even though the efficient markets hypothesis (EMH) assumes that markets behave as if all investors were rational, under the EMH it is still possible to have some irrational investors in a rational market.

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Definitions:

Dividend Payments

Cash payments made by a company to its shareholders, usually derived from the company's profits.

Financing Activities

Transactions related to raising capital, repaying investors, and restructuring company debt within a business's cash flow statement.

Long-Term Debt

Borrowed money that is due for repayment more than one year into the future.

Financing Activities

Financing activities involve transactions between a company and its investors or creditors, affecting the equity and long-term liabilities on the balance sheet.