The efficient markets hypothesis implies that in the stock market:
A) everyone can earn more than everyone else some of the time.
B) no one can systematically earn more than the average market return.
C) people with more funds earn higher returns.
D) people can use technical analysis to systematically earn high returns.

Question

Quizplus · Accepted Answer

According to the efficient markets hypothesis, all available information is immediately reflected in stock prices, making it impossible for anyone to consistently earn more than the average market return through stock selection or market timing. Therefore, option B is the correct choice. Option A is incorrect because it implies that some individuals can outperform the market on a consistent basis, which the efficient markets hypothesis suggests is not possible. Option C is incorrect because higher returns are not necessarily correlated with higher funding. Option D is also incorrect because technical analysis cannot provide an advantage in a perfectly efficient market.

The Efficient Markets Hypothesis Implies That in the Stock Market