In a perfectly efficient market with random price changes,
A) changes in prices occur which may appear to be positive as well as negative
B) price behavior may often be irrational
C) mispriced securities will not occur
D) highly alert investors will not have profit opportunities

Question

Quizplus · Accepted Answer

In a perfectly efficient market with random price changes, changes in prices occur which may appear to be positive as well as negative. This is because in such a market, all information is already reflected in the prices, and therefore there are no undervalued or overvalued assets. As a result, the prices can only change randomly, and even a seemingly positive change may not necessarily signal a good investment opportunity.

In a Perfectly Efficient Market with Random Price Changes