If the efficient market hypothesis holds, investors should expect
I.to receive a fair price for their security
II.to earn a normal rate of return on their investments
III.to be able to pick stocks that will outperform the market
A)I only
B)II only
C)III only
D)I and II only

Question

Quizplus · Accepted Answer

According to the efficient market hypothesis, investors should expect to receive a fair price for their security as all available information is already reflected in its price. This implies that it is difficult to pick stocks that will outperform the market, but investors should still be able to earn a normal rate of return on their investments. Therefore, option I and II are correct, while option III is not.

If the Efficient Market Hypothesis Holds, Investors Should Expect