Which of the following tend to reinforce the argument that the ﬁnancial markets are eﬃcient?
I.Information spreads rapidly in today's world.
II.There is tremendous competition in the ﬁnancial markets.
III.Market prices continually ﬂuctuate.
IV.Market prices react suddenly to unexpected news announcements.
A)I and III only.
B)II and IV only.
C)I, II, and III only.
D)II, III, and IV only.
E)I, II, III, and IV.

Question

Quizplus · Accepted Answer

I. Information spreads rapidly, allowing all participants to have access to the same information quickly, which is a characteristic of efficient markets. II. High competition ensures that prices reflect all available information as participants strive for profits. IV. Sudden reactions to news announcements indicate that markets are incorporating new information into prices efficiently. III, while it indicates market activity, does not directly support market efficiency as much as the others, but it does not contradict it either.

Which of the Following Tend to Reinforce the Argument That