The efficient market hypothesis implies that
A)investors have perfect forecasting ability.
B)prices do not fluctuate.
C)the market is irrational.
D)competition among investors is such that one can earn only a normal return.
E)all of the above.

Question

Quizplus · Accepted Answer

The efficient market hypothesis suggests that competition among investors is so high that no single investor can consistently outperform the market or earn abnormal returns, known as beating the market. This implies that investors cannot have perfect forecasting ability and that prices are always fluctuating based on new information. The efficient market hypothesis does not suggest that the market is irrational, as it implies that prices always reflect all available information. Therefore, option D is the best choice.

The Efficient Market Hypothesis Implies That