In an efficient market,the market value and intrinsic value of a security should be equal.

Question

Quizplus · Accepted Answer

In an efficient market, the prices of securities should be determined by market forces of supply and demand, which should result in the market value of a security reflecting its intrinsic (true) value. Therefore, the market value and intrinsic value of a security should be equal in an efficient market. However, in reality, markets are rarely fully efficient, and market prices may deviate from intrinsic values due to various factors such as information asymmetries, transaction costs, and behavioral biases.

In an Efficient Market,the Market Value and Intrinsic Value of a Security