If the optimal forecast of the return on a security exceeds the equilibrium return,then
A)the market is inefficient.
B)no unexploited profit opportunities exist.
C)the market is in equilibrium.
D)the market is myopic.

Question

Quizplus · Accepted Answer

The optimal forecast of the return on a security exceeding the equilibrium return implies that the market is not pricing the security correctly, suggesting an inefficient market. In an efficient market, there are no unexploited profit opportunities, and the market is in equilibrium. Myopic refers to shortsightedness or a lack of foresight, and it is unrelated to the question at hand. Therefore, the correct answer is A.

If the Optimal Forecast of the Return on a Security