Which of the following is NOT an implication resulting from the assumption that capital markets are in equilibrium?
A)All assets are assumed to be bought and sold at the equilibrium price established by supply and demand.
B)All assets are not correctly priced to adequately compensate investors for the associated risks.
C)The price for an overpriced asset would eventually fall to an equilibrium level so that the asset is held by all investors.
D)The market portfolio will be the most efficient portfolio, with respect to the weights attached to the individual securities composing it.

Question

Quizplus · Accepted Answer

The assumption of equilibrium does not necessarily imply that all assets are correctly priced to adequately compensate investors for the associated risks. In fact, some assets may be mispriced, resulting in potential opportunities for profitable trades by investors who recognize the mispricing.

Which of the Following Is NOT an Implication Resulting from the Assumption