In an efficient capital market, security prices fully reflect the knowledge and expectations of all investors at a particular point in time.

Question

Quizplus · Accepted Answer

In an efficient capital market, all available information is already reflected in security prices, making it difficult for investors to consistently outperform the market based on their knowledge and expectations alone. Therefore, security prices are assumed to be a true reflection of all investor knowledge and expectations at any given time.

In an Efficient Capital Market, Security Prices Fully Reflect the Knowledge