Which one of the following statements is correct concerning market efficiency?
A) Real asset markets are more efficient than financial markets.
B) If a market is efficient, arbitrage opportunities should be common.
C) In an efficient market, some market participants will have an advantage over others.
D) A firm will generally receive a fair price when it sells shares of stock.
E) New information will gradually be reflected in a stock's price to avoid any sudden change in the price of the stock.

Question

Quizplus · Accepted Answer

In an efficient market, all available information is already reflected in stock prices, so a firm should receive a fair price when it sells shares of stock. Real asset markets and financial markets can both be efficient, but there is no guarantee that arbitrage opportunities will be common in an efficient market (they may already have been exploited and eliminated). In an efficient market, no participants should have a consistent advantage over others, and new information is quickly reflected in prices rather than gradually to avoid sudden changes.

Which One of the Following Statements Is Correct Concerning Market