Efficient financial markets fluctuate continuously because:
A) the markets are continually reacting to old information as that information is absorbed.
B) the markets are continually reacting to new information.
C) arbitrage trading is limited.
D) current trading systems require human intervention.
E) investments produce varying levels of net present values.

Question

Quizplus · Accepted Answer

Efficient financial markets react quickly to new information, causing prices to fluctuate continuously. As new information becomes available, investors make adjustments to their beliefs about the value of securities, leading to changes in prices. Other choices are not the primary reason behind the continuous fluctuations in efficient financial markets.

Efficient Financial Markets Fluctuate Continuously Because