Which of the Following Would Be Inconsistent with an Efficient

question 123

Multiple Choice

Which of the following would be inconsistent with an efficient market?

• A) Information arrives randomly and independently.
• B) Stock prices adjust rapidly to new information.
• C) Price changes are independent.
• D) Price changes are random.
• E) Price adjustments are biased.

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Definitions:

Variance

A statistical measure that represents the dispersion of a set of data points or investment returns around their mean, indicating their spread or risk.

Indifference Curve

An indifference curve represents a graphical depiction of different bundles of goods between which a consumer is indifferent, reflecting their preferences for those goods' combinations.

Mean-Standard Deviation Graph

A graphical representation used in finance to show the risk (standard deviation) and return (mean) of different investments.

Utility Function

A mathematical representation of a decision-maker's preference ranking for a set of outcomes or goods, reflecting their attitude towards risk.