Which one of the following statements regarding market efficiency is false?
A)The prices of securities traded in the capital markets fully reflect all publicly available and privately held information.
B)The prices of securities are adjusted based on new information almost immediately in an unbiased manner.
C)Market prices adjust in an immediate manner because of the communication system in the marketplace.
D)An individual investor cannot use published information to earn an "abnormal" return on a security investment with a given amount of risk.

Question

Quizplus · Accepted Answer

Statement A is false because it describes a form of market efficiency that incorporates both publicly available and privately held (insider) information. In reality, the Efficient Market Hypothesis (EMH) typically assumes that prices reflect all publicly available information, not privately held information.

Which One of the Following Statements Regarding Market Efficiency Is