The theory that markets are efficient and that prices accurately reflect all information at any point in time is best described as:
A) Fama-French Model.
B) Arbitrage Pricing Theory.
C) Efficient market hypothesis.
D) Capital asset pricing model (CAPM).

Question

Quizplus · Accepted Answer

The Efficient Market Hypothesis (EMH) posits that stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. Therefore, according to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices.

The Theory That Markets Are Efficient and That Prices Accurately