Asked by Elijah Filsinger on Jun 21, 2024
Verified
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.
Efficient Markets Hypothesis
A theory stating that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns than the overall market.
Semistrong-Form
Part of the Efficient Market Hypothesis that asserts all publicly available information is reflected in asset prices, including historical data and all public disclosures.
Expected Return
The average return anticipated on an investment, factoring in the probabilities of each possible outcome.
- Identify the differences among assorted market efficiency forms and their implications.
Verified Answer
Learning Objectives
- Identify the differences among assorted market efficiency forms and their implications.
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