Which of the following statement(s) is/are true if the efficient market hypothesis holds? I) It implies perfect forecasting ability
II) It implies market is irrational
III) It implies that prices follow a particular pattern
IV) It implies that prices reflect all available information
A) I only
B) II only
C) I and III only
D) IV only

Question

Quizplus · Accepted Answer

The efficient market hypothesis argues that prices at any given time fully reflect all available information, whether from financial statements, economic data, or any other relevant factor. Therefore, IV only is the correct option. The argument of the efficient market hypothesis is not necessarily that the market is rational or that market prices follow a particular pattern, so options II and III are incorrect. Option I, which implies perfect forecasting ability, is also not necessarily accurate, as the efficient market hypothesis assumes that prices already discount all publicly available information, including future prospects.

Which of the Following Statement(s) Is/are True If the Efficient