If the capital markets are efficient, then the sale or purchase of any security at the prevailing market price is:
A) Always a positive NPV transaction
B) Generally a zero NPV transaction
C) Is always a negative NPV transaction
D) None of the above

Question

Quizplus · Accepted Answer

If the capital markets are efficient, then the prevailing market price of a security should reflect all publicly available information. Therefore, buying or selling a security at the prevailing market price is likely to result in a zero net present value transaction, as the price reflects all available information and there are no expected excess returns. However, it is still possible for individual investors to achieve positive or negative NPV transactions due to their own information or investment strategies.

If the Capital Markets Are Efficient, Then the Sale or Purchase