Efficiency predicts that when markets reach a peak there will often be a 'realignment' or 'market correction'.

Question

Quizplus · Accepted Answer

The financial press often refers to a market correction,a realignment or a downgrade due to price levels having reached a peak.That is,what goes up must come down.This is a fallacy.The efficient markets hypothesis simply claims that prices fully reflect available information.If the available information set contains information on economic fundamentals that are consistent with high price levels,then we expect to observe high price levels.These levels will be maintained unless new information arrives that justifies lower prices.

Efficiency Predicts That When Markets Reach a Peak There Will