One reason why the efficient capital market hypothesis may not hold in reality is that:
A)risk has been eliminated from the process of arbitrage.
B)most investors appear in studies to be rational.
C)arbitrage appears to be fully effective.
D)irrationality may be related across individuals.
E)irrationalities cancel out across investors.

Question

Quizplus · Accepted Answer

One reason why the efficient capital market hypothesis may not hold in reality is that irrationality may be related across individuals. This means that if a set of investors are irrational, they may share the same biases and make similar investment decisions, which can lead to market inefficiencies. This can prevent the market from being fully efficient and therefore contradict the efficient market hypothesis.

One Reason Why the Efficient Capital Market Hypothesis May Not