When a stock begins actively trading on an exchange regularly,any excess returns begin to disappear because:

Question

Quizplus · Accepted Answer

As more and more investors begin trading the stock regularly, the market becomes more efficient in processing new information and adjusting the price accordingly, which means that any excess returns disappear as the price adjusts to reflect all available information. Therefore, choice A is the best answer. Choices B and C are incorrect, as market inefficiency and insider trading would actually increase excess returns rather than reduce them. Choice D is overly general and does not provide a specific reason for the disappearance of excess returns.

When a Stock Begins Actively Trading on an Exchange Regularly,any