The efficient markets hypothesis says that
A) only individual investors can make money in the stock market.
B) it should be difficult to find stocks whose price differs from their fundamental value.
C) stock prices do not follow a random walk.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis states that it should be difficult to find stocks whose price differs from their fundamental value, implying that stock prices follow a random walk and that it is hard to outperform the market on a consistent basis. Option A is incorrect because the efficient markets hypothesis implies that it is difficult for any investor, whether individual or institutional, to consistently make money in the stock market. Option C is also incorrect as the efficient markets hypothesis implies that stock prices follow a random walk. Option D is incorrect because only option B is correct.

The Efficient Markets Hypothesis Says That