When a market is externally efficient, it means that
A) timely and accurate information is available.
B) the market is liquid.
C) transaction costs are low.
D) prices adjust rapidly to new information.
E) the number of buyers and sellers are the same.

Question

Quizplus · Accepted Answer

When a market is externally efficient, it means that prices adjust rapidly to new information. This indicates that all available information is reflected in the market price without delay. Timely and accurate information, liquidity, and low transaction costs are also important for market efficiency, but they do not necessarily define external efficiency. The number of buyers and sellers being the same is not a determinant of market efficiency.

When a Market Is Externally Efficient, It Means That