Which one of the following is most indicative of a totally efficient stock market?
A) Extraordinary returns earned on a routine basis
B) Positive net present values on stock investments over the long-term
C) Zero net present values for all stock investments
D) Arbitrage opportunities which develop on a routine basis
E) Realizing negative returns on a routine basis

Question

Quizplus · Accepted Answer

A totally efficient stock market would result in zero net present values for all stock investments, as stock prices would accurately reflect all available information and future expectations. This means that investors would be unable to consistently earn extraordinary returns or identify undervalued stocks, and there would be no arbitrage opportunities. Realizing negative returns on a routine basis would also not be indicative of a totally efficient stock market.

Which One of the Following Is Most Indicative of a Totally