Question

In an efficient market:

a. security prices react quickly to new information.
b. security prices are seldom far above or below their justified levels.
c. security analysis will not enable investors to realize superior returns consistently.
d. one cannot make money.
e. A, B and C

Answer 1

Answer:

The answer is E.

Explanation:

Market efficiency is the degree to which market prices shows all available and relevant information at the same time. And market react react quickly to new information.

If markets are efficient, then all information is already incorporated into prices and possiblity of beating the market is eliminated. In this market, there are no undervalued or overvalued securities available. So an efficient market should also able to earn the appropriate risk-adjusted rate of return