Which of the following would be indicative of inefficient markets?
A)Overreaction and reversion
B)Delayed response
C)Immediate and accurate response
D)Overreaction with reversion and delayed response
E)Immediate and accurate response with a zero NPV

Question

Quizplus · Accepted Answer

Overreaction with reversion and delayed response are both indicative of inefficient markets. Immediate and accurate response (C) and immediate and accurate response with a zero NPV (E) are characteristics of efficient markets. Overreaction and reversion alone (A) does not necessarily indicate inefficiency, as some amount of volatility and mean reversion can still exist in an efficient market. Delayed response (B) suggests inefficiency, but it is not alone sufficient to conclude inefficiency.

Which of the Following Would Be Indicative of Inefficient Markets