(9A). For a stock to be in equilibrium, that is, for there to be no long-term pressure for its price to depart from its current level, then
A) the expected future return must be less than the most recent past realized return.
B) the past realized return must be equal to the expected return during the same period.
C) the required return must equal the realized return in all periods.
D) the expected return must be equal to both the required future return and the past realized return.
E) the expected future return must be equal to the required return.

Question

Quizplus · Accepted Answer

For a stock to be in equilibrium, the expected future return must be equal to the required return. This means that there is no long-term pressure for the stock's price to rise or fall, as investors are already factoring in all available information and their required return is in line with their expected future return. None of the other options describe this state of equilibrium.

(9A) for a Stock to Be in Equilibrium, That Is