If capital markets are eﬃcient, then ________________________.
A) there is no reason to believe that prices are too high or too low
B) it is possible to proﬁt regularly from publicly available information
C) prices will adjust slowly when reacting to new information
D) it is not possible to make money by playing the stock market
E) historical price trends will give you a good idea of where prices are headed in the future

Question

Quizplus · Accepted Answer

If capital markets are efficient, it means that all publicly available information is already reflected in the current prices of the securities. Therefore, there is no reason to believe that prices are too high or too low as they already incorporate all available information. While it is still possible to make money in the stock market, it would not be due to inefficiencies in the market but rather through investing in undervalued securities or having an informational advantage over other investors. The efficiency of capital markets suggests that prices will adjust quickly and accurately to any new information, making it difficult to consistently profit from publicly available information or historical trends.

If Capital Markets Are Eﬃcient, Then ________________________