Which one of the following relates to the risk adjustment problem encountered when testing market efficiency?
A)ascertaining how historical prices relate to current stock prices
B)determining whether a market reaction was appropriate or overstated
C)correctly determining the correct risk-adjustment procedure
D)determining what undocumented information existed on any particular trading day
E)identifying patterns that occur over time in the pricing of a particular security

Question

Quizplus · Accepted Answer

The risk adjustment problem encountered when testing market efficiency relates to correctly determining the correct risk-adjustment procedure. This means accounting for factors such as inflation, interest rates, and other macroeconomic variables that may affect the performance of securities in the market. Without appropriate risk adjustments, it is difficult to determine whether a market is efficient or not.

Which One of the Following Relates to the Risk Adjustment