When new information becomes public in the market,evidence suggests that:
A) transaction costs will erase any benefit of trading on the new information.
B) insiders will be the only investors to gain.
C) it takes at least three trading days for share prices to adjust.
D) share prices adjust rapidly to the new information.

Question

Quizplus · Accepted Answer

Empirical evidence suggests that share prices adjust rapidly to new information in the market. This is known as the efficient market hypothesis, which states that stock prices already reflect all available information, making it difficult for investors to consistently make abnormal profits by trading on new information. This is supported by the fact that stock prices often react immediately to news or events, and that high trading volumes accompany these price movements.

When New Information Becomes Public in the Market,evidence Suggests That