According to the Efficient Market Hypothesis, Financial Markets Fluctuate Daily

question 14

Multiple Choice

According to the efficient market hypothesis, financial markets fluctuate daily because they:

• A) are inefficient.
• B) slowly react to new information.
• C) are continually reacting to new information.
• D) offer tremendous arbitrage opportunities.

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Definitions:

Trading Securities

Financial instruments that are purchased and held primarily for selling them in the near term to generate income on short-term price differences.

Marketable Securities

Financial instruments that can be easily converted into cash, typically with high liquidity and short-term maturities.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee’s profits or losses.

Significant Influence

The power to participate in the financial and operating policy decisions of another entity, without having control over it.