If financial markets are efficient, that
Suggests that
A) investors cannot earn superior returns
B) investors cannot expect to outperform the market consistently
C) security prices are random
D) bearing additional risk will not increase return

Question

Quizplus · Accepted Answer

If financial markets are efficient, it means all available information is already reflected in security prices. This makes it difficult for investors to outperform the market consistently, as they cannot use available information to gain an advantage over others in the market. However, it does not necessarily mean that investors cannot earn superior returns or that security prices are random. Bearing additional risk can still increase return in an efficient market, as higher returns are required to compensate for the additional risk taken.

If Financial Markets Are Efficient, That