If the stock market is semistrong efficient, then

Question

Quizplus · Accepted Answer

In a semistrong efficient market, all publicly available information is already reflected in the stock prices. This means that investors cannot earn any excess returns by relying solely on publicly available information. Therefore, option A is incorrect. However, investors can still expect stocks to be fairly priced according to their risk most of the time, which is why option B is a correct statement. Additionally, since all new information about a firm is rapidly reflected in its stock price, investors can expect this to be the case as well, making option C also a correct statement. Therefore, the correct answer is D. In a semi-strong efficient market, all publicly available information is already reflected in the stock prices, so an investor cannot earn any excess return by using that information. Therefore, option A is incorrect. However, since the market is still efficient with regards to risk, investors can expect stocks to be fairly priced according to their risk most of the time (option B). Additionally, any new, publicly available information about a company will be rapidly reflected in its stock price, making option C a correct statement as well. Therefore, option D is the correct answer.

If the Stock Market Is Semistrong Efficient, Then