Which of the following is most correct?
A) In an efficient market, investors will buy overvalued stock which will drive its price down.
B) In an efficient market, investors will sell undervalued stock which will drive its price down.
C) In an efficient market, investors will sell overvalued stock which will drive its price down.
D) none of these choices are correct.

Question

Quizplus · Accepted Answer

In an efficient market, all available information is already reflected in stock prices. Therefore, if a stock is overvalued, investors will recognize this and sell the stock, which will drive its price down towards its true value. This process is part of the market's self-correcting mechanism in response to overvaluation.

Which of the Following Is Most Correct