Which of the following tend to reinforce the argument that the financial markets are efficient? I.Information spreads rapidly in today's world.
II)There is tremendous competition in the financial markets.
III)Market prices continually fluctuate.
IV)Market prices react suddenly to unexpected news announcements.
A)I and III only
B)II and IV only
C)I,II,and III only
D)II,III,and IV only
E)I,II,III,and IV

Question

Quizplus · Accepted Answer

The Efficient Market Hypothesis (EMH) suggests that financial markets are efficient in reflecting all available information. I) Information spreading rapidly ensures that all relevant information is quickly incorporated into stock prices. II) High competition among investors encourages the swift incorporation of information into prices, as investors seek to gain an advantage. III) Continuous price fluctuation reflects the constant updating of stock prices with new information. IV) Sudden reactions to unexpected news announcements indicate that markets are efficient in adjusting prices when new information becomes available. All these points support the argument that financial markets are efficient.

Which of the Following Tend to Reinforce the Argument That