A rational market is one in which all participants use all of the available information to make predictions about the future and market participants learn from and adjust to their mistakes.

Question

Quizplus · Accepted Answer

A rational market theory assumes that market participants take all available information into account when making investment decisions and that they learn from past mistakes, adjusting their expectations accordingly. This leads to asset prices that reflect all known information.

A Rational Market Is One in Which All Participants Use