Which of the Following Is True of Efficient-Market Hypothesis

question 98

Multiple Choice

Which of the following is true of efficient-market hypothesis?

• A) Securities are typically in disequilibrium, meaning they are fairly priced and their expected returns are more than their required returns.
• B) Insider trading scandals have proven that stocks are not fully and fairly priced; as a result, it would be worthwhile for investors should spend time searching for mispriced (over- or under-valued) stocks.
• C) At any point in time, security prices fully reflect all internal information available about the firm and its securities, and these prices are insensitive to new information.
• D) Since stocks are fully and fairly priced, it follows that investors should not waste their time trying to find and capitalize on miss-priced (undervalued or overvalued) securities.

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