Asked by Vasavi Arunachala Pandian on May 03, 2024
Verified
In efficient markets, investments have an expected risk premium equal to zero.
Efficient Markets
A hypothesis suggesting that financial markets are "informationally efficient," meaning prices of securities reflect all available information at any moment.
Expected Risk Premium
The extra return investors require to hold a risky asset over a risk-free asset, reflecting the additional risk.
- Acquire knowledge about the association between risk and expected returns, and how returns are affected by efficiency.
Verified Answer
HR
Hemashi Rajapaksha VithanageMay 07, 2024
Final Answer :
False
Explanation :
In efficient markets, investments are expected to have a risk premium greater than zero to compensate investors for taking on additional risk beyond that of a risk-free investment.
Learning Objectives
- Acquire knowledge about the association between risk and expected returns, and how returns are affected by efficiency.
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