Another way to state the efficient market hypothesis is that in an efficient market,
A) unexploited profit opportunities will never exist as market participants, such as arbitrageurs, ensure that they are instantaneously dissipated.
B) unexploited profit opportunities will not exist for long, as market participants will act quickly to eliminate them.
C) every financial market participant must be well informed about securities.
D) only A and C of the above.

Question

Quizplus · Accepted Answer

The efficient market hypothesis states that in an efficient market, unexploited profit opportunities will not exist for long, as market participants will act quickly to eliminate them. This means that any new information is quickly reflected in the asset prices, making it difficult for investors to consistently outperform the market by finding mispricings. The hypothesis does not require all market participants to be well informed about securities, only that their actions will quickly reflect new information.

Another Way to State the Efficient Market Hypothesis Is That