The distinguishing feature of a well-functioning financial market is the
A)continual increase in the liquidity of most assets.
B)continual reduction in the riskiness of most assets.
C)increased ease of converting common stocks into bonds.
D)incorporation of available information into asset prices.

Question

Quizplus · Accepted Answer

A well-functioning financial market incorporates available information into asset prices, meaning that the prices of assets reflect all available information about the asset. This allows market participants to make informed investment decisions and reduces the potential for mispricing and market inefficiencies. While liquidity and risk reduction are important features of financial markets, they are not the distinguishing feature of a well-functioning market. The ease of converting stocks into bonds is not necessarily a desirable feature of financial markets and is not directly related to market functionality.

The Distinguishing Feature of a Well-Functioning Financial Market Is the