The efficient market hypothesis implies that
A)all investments should earn the same average rate of return over time.
B)any investment should earn a normal return commensurate with the investment's risk.
C)efficient markets will tend to have fixed prices from one day to the next.
D)stock prices are only efficient when all investors review their portfolios on a daily basis.
E)investors must be disinterested in their investments for the markets to be efficient.

Question

Quizplus · Accepted Answer

The efficient market hypothesis suggests that any investment should earn a normal return that is commensurate with the investment's risk. In other words, the market is able to accurately reflect all available information about a company, and the stock price will adjust accordingly. This means that investors will earn a return that reflects the level of risk they are taking on, but not necessarily a higher return than other investments with similar levels of risk.

The Efficient Market Hypothesis Implies That