The efficient market hypothesis says that
A)market prices reflect underlying asset values.
B)individual investors should not participate in the financial markets.
C)investors should expect to earn abnormal profits.
D)financial managers can accurately time stock and bond sales.
E)creative accounting can be used to inflate stock prices.

Question

Quizplus · Accepted Answer

The efficient market hypothesis states that market prices accurately and quickly reflect all relevant and available information about an underlying asset, including its intrinsic value. Therefore, market prices should generally align with the true value of the asset, making it difficult or impossible for investors to consistently generate abnormal profits by trading or investing in the market.

The Efficient Market Hypothesis Says That