The driving forces leading markets to be efficient is:
A) Arbitrage and asymmetric information
B) Competition and the profit motive
C) Abnormal returns and the central limit theorem
D) Volatility and the nature of risk averse investors
E) Irrationality and government anti-trust legislation

Question

Quizplus · Accepted Answer

Competition and the profit motive drive investors to seek out and act on information that can provide an advantage in the markets, ultimately leading to efficiency. Arbitrage and asymmetric information also contribute to efficiency, but they are not the driving forces. Abnormal returns and the central limit theorem are concepts related to market efficiency but are not factors that drive it. Volatility and risk aversion can actually hinder market efficiency, as they can lead to irrational behavior. Irrationality and government anti-trust legislation are not factors that drive market efficiency.

The Driving Forces Leading Markets to Be Efficient Is