Asked by Staranna Taylor on May 21, 2024
Verified
Assume that markets are semistrong efficient,but not strong-form efficient.Which of the following statements is correct?
A) Each common stock has an expected return equal to that of the overall market.
B) Investors may be able to earn returns above those predicted by the SML if they have access to information that has not been publicly revealed.
C) Investors can expect to earn returns above those predicted by the SML if they have access to public information.
D) Investors should expect to earn more than the returns that are predicted by the SML, because if they do not, they should not invest in the stock market.
Semistrong Efficient
This term refers to a form of market efficiency that assumes all publicly available information is already reflected in stock prices, including historical and fundamental data.
Strong-Form Efficient
A state of market efficiency where all information, public and private, is accounted for in stock prices.
SML
Security Market Line, a graphical representation that shows the expected return of a security or portfolio as a function of its beta (systematic risk).
- Distinguish among the diverse types of market efficiency and understand their consequences.
Verified Answer
Learning Objectives
- Distinguish among the diverse types of market efficiency and understand their consequences.
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