Which of the following statements are true if the efficient market hypothesis holds? It implies that future events can be forecast with perfect accuracy. It implies that prices reflect all available information. It implies that security prices change for no discernible reason. It implies that prices do not fluctuate.

Question

Colt Whitney

Business

21 June, 04:58

Which of the following statements are true if the efficient market hypothesis holds? It implies that future events can be forecast with perfect accuracy. It implies that prices reflect all available information. It implies that security prices change for no discernible reason. It implies that prices do not fluctuate.

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Answers (1)

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Santino Anthony · Answer 1

The correct answer is b. It implies that prices reflect all available information.

Explanation:

The efficient market hypothesis is a theory initially enunciated by Eugene Fama (1970). It states that the current price of an asset in the market reflects all available information that exists (historical, public and private).

This theory considers that any news or future event that may affect the price of an asset will make the price adjust so quickly that it is impossible to obtain an economic benefit from it. Given this, it is considered a waste of time and money to try to analyze the values, since there will be no undervalued or overvalued assets in the market.