The Efficient Markets Hypothesis Predicts That an Investor

question 25

Multiple Choice

The efficient markets hypothesis predicts that an investor

• A)will not be able consistently to earn above-normal profits from buying or selling stocks.
• B)will be able consistently to earn above-normal profits from buying or selling stocks so long as he or she makes use of rational expectations.
• C)will be able consistently to earn above-normal profits from buying or selling stocks so long as he makes us of adaptive expectations.
• D)will be able consistently to earn above-normal profits so long as stock prices in general are rising.

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Definitions:

Debt-Equity Ratio

An indicator of the financial distribution between shareholder equity and debt in asset financing.

Total Debt

The sum of all short-term and long-term liabilities owed by a company, reflecting its overall debt load.

Equity

The value of ownership interest in a company, represented by the shares held by investors.