Which Statement Regarding the Efficient Markets Hypothesis Is True

question 70

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:

Variable

An element, feature, or factor that is likely to vary or change; it could also refer to costs that fluctuate with the level of output.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent or salaries, providing predictability for budgeting.

Responsibility Accounting

A system of accounting that segments financial information by areas of responsibility, allowing managers to be held accountable for their areas' financial performance.

Not-for-Profit Entities

Organizations that operate for purposes other than making a profit, often focusing on social, educational, or charitable endeavors.