The ________________ states that in equilibrium, prices of financial instruments reflect all available information.

Question

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The efficient markets hypothesis suggests that in an efficient market, prices of financial instruments reflect all available information. This means that any new information that becomes available will be quickly incorporated into the price of that instrument, making it difficult to consistently outperform the market through stock picking or market timing. The stronger version of the efficient markets hypothesis states that prices reflect not just all publicly available information, but also all privately held information. The fundamental value theory suggests that stocks have an intrinsic value based on their future earnings potential and other factors, and that prices will eventually converge towards this value. Rational expectation theory posits that market participants make decisions based on the most accurate information available to them, and that prices will reflect these decisions.

The ________________ States That in Equilibrium, Prices of Financial Instruments