Another way to state the efficient markets condition is: in an efficient market, ________.
A) unexploited profit opportunities will be quickly eliminated
B) unexploited profit opportunities will never exist
C) unexploited profit opportunities never existed
D) every financial market participant must be well informed about securities

Question

Quizplus · Accepted Answer

The efficient markets condition implies that all available information about securities is already reflected in their prices, making it difficult or impossible for investors to consistently earn above-average returns. Therefore, any unexploited profit opportunities in an efficient market will be quickly eliminated as investors trade on new information. Choice B and C are incorrect because profit opportunities may exist temporarily but will not persist in an efficient market. Choice D is incorrect because not every financial market participant needs to be well informed for the market to be efficient; rather, it is only necessary that information is incorporated into prices by some participants.

Another Way to State the Efficient Markets Condition Is: in an Efficient