If the efficient market hypothesis holds,investors should expect:
A) to earn only a normal return.
B) to receive a fair price for their securities.
C) to always be able to pick stocks that will outperform the market averages.
D) Both to earn only a normal return; and to receive a fair price for their securities.
E) Both to receive a fair price for their securities; and to always be able to pick stocks that will outperform the market averages.

Question

Quizplus · Accepted Answer

The efficient market hypothesis asserts that stock prices fully reflect all available information about a firm, thus making it impossible to consistently achieve returns above or below average market returns. As a result, investors should expect to earn only the normal return and receive a fair price for their securities, as prices should already reflect all available information. The other options (C and E) contradict this hypothesis.

If the Efficient Market Hypothesis Holds,investors Should Expect