Asked by Justin Robbins on Apr 29, 2024
Verified
In efficient markets, investments have an expected return equal to zero.
Efficient Markets
A concept in financial economics that states that asset prices fully reflect all available information at any point in time.
Expected Return
The probable return on an investment, considering all potential outcomes and their likelihoods.
- Comprehend the relationship between risk and expected returns, as well as the impact of efficiency on returns.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
False
Explanation :
In efficient markets, investments are expected to offer a return that compensates for the risk taken, not an expected return of zero. The efficient market hypothesis suggests that asset prices fully reflect all available information, meaning that securities are fairly priced to offer a return that is commensurate with their level of risk.
Learning Objectives
- Comprehend the relationship between risk and expected returns, as well as the impact of efficiency on returns.
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