Research has found that the options market is:
A) efficient before controlling for transaction costs.
B) efficient after controlling for transaction costs.
C) highly inefficient.
D) none of the above

Question

Quizplus · Accepted Answer

Research has shown that the options market is efficient after controlling for transaction costs. This means that the market prices of options reflect all available information and options are fairly priced, taking into account the costs of trading them. However, without controlling for transaction costs, the options market may not be efficient due to various factors such as bid-ask spreads, liquidity, and market frictions.

Research Has Found That the Options Market Is