If the stock market is semistrong efficient, which of the following statements is most correct?
A) All stocks should have the same expected returns; however, they may have different realized returns.
B) In equilibrium, stocks and bonds should have the same expected returns.
C) Investors can outperform the market if they have access to information which has not yet been publicly revealed.
D) If the stock market has been performing strongly over the past several months, stock prices are more likely to decline than increase over the next several months.
E) None of the statements above is correct.

Question

Quizplus · Accepted Answer

If the stock market is semistrong efficient, all publicly available information is already reflected in stock prices, meaning investors cannot consistently outperform the market by using information that has not yet been revealed. Therefore, option C is the correct statement. Option A is incorrect because stocks with higher risk should have higher expected returns, even if they have the same information available. Option B is incorrect because stocks and bonds have different risk profiles and therefore should have different expected returns. Option D is incorrect because there is no evidence to support such a claim, and the efficient market hypothesis suggests that past performance is not a reliable indicator for future performance.

If the Stock Market Is Semistrong Efficient, Which of the Following