Which one of the following best describes the current understanding of market efficiency?
A)The market tends to overreact to new information in a manner that can be used to earn abnormal returns.
B)Markets underreact to unanticipated events in a manner that can be used to earn abnormal returns.
C)The market appears to be highly inefficient.
D)Short-term market movements are difficult, if not impossible, to predict accurately.
E)Markets tend to react slowly to unanticipated announcements.

Question

Quizplus · Accepted Answer

The current understanding of market efficiency is that short-term market movements are difficult, if not impossible, to predict accurately. This is because markets are believed to incorporate all relevant information into their prices quickly and efficiently, leaving little opportunity for investors to earn abnormal returns.

Which One of the Following Best Describes the Current Understanding