In an efficient market, the price of a security will:
A) Always rise immediately upon the release of new information with no further price adjustments related to that information.
B) React to new information over a two-day period after which time no further price adjustments related to that information will occur.
C) Rise sharply when new information is first released and then decline to a new stable level by the following day.
D) React immediately to new information with no further price adjustments related to that information.
E) Be slow to react for the first few hours after new information is released allowing time for that information to be reviewed and analyzed.

Question

Quizplus · Accepted Answer

In an efficient market, prices reflect all available information as soon as it becomes available. This means that the price of a security will adjust immediately to new information, with no further adjustments as the market has already incorporated the information into the price.

In an Efficient Market, the Price of a Security Will