If in an efficient market all prices are correct and reflect market fundamentals,which of the following is a false statement?
A) A stock that has done poorly in the past is more likely to do well in the future.
B) One investment is as good as any other because the securities' prices are correct.
C) A security's price reflects all available information about the intrinsic value of the security.
D) Security prices can be used by managers to assess their cost of capital accurately.

Question

Quizplus · Accepted Answer

The statement "A stock that has done poorly in the past is more likely to do well in the future" is a false statement in an efficient market because the market prices reflect all available information about the stock, including its past performance. In an efficient market, past performance is not a reliable indicator of future performance. The other statements are true in an efficient market.

If in an Efficient Market All Prices Are Correct and Reflect