Which of the following is the best deﬁnition for the concept of eﬃcient markets hypothesis (EMH)?
A) The return earned in an average year over a multi-year period.
B) The hypothesis is that actual capital markets are eﬃcient.
C) The average squared deviation between the actual return and the average return.
D) Statistical measure of maximum loss used by banks and other ﬁnancial institutions to manage risk exposures.
E) The positive square root of the variance.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis (EMH) states that actual capital markets are efficient, meaning that the prices of securities reflect all available information in the market. Option B clearly states this concept. The other options are unrelated to EMH.

Which of the Following Is the Best Deﬁnition for the Concept