If markets are not reasonably efficient, then

Question

Quizplus · Accepted Answer

If markets are not reasonably efficient, then estimates of expected returns that were based on security prices will not be reliable. This is because security prices in an inefficient market may not reflect all available information, resulting in inaccurate estimates of expected returns. Therefore, other methods of estimating expected returns may need to be used in an inefficient market. The other answer choices are not correct - the need for a discount rate to analyze project cash flows and estimates of expected returns in general are still needed, regardless of market efficiency.

If Markets Are Not Reasonably Efficient, Then