The concept of market efficiency means that we should expect securities and other assets to be:
A)underpriced given their expected risks and returns.
B)overpriced given their expected risks and returns.
C)fairly priced given their expected risks and returns.
D)none of the given options is correct as prices cannot be predicted.

Question

Quizplus · Accepted Answer

The concept of market efficiency states that securities and other assets are priced fairly given their expected risks and returns. This means that market participants have access to all relevant information and incorporate it into their decision-making process, leading to efficient pricing. Therefore, we should not expect securities to be consistently underpriced or overpriced.

The Concept of Market Efficiency Means That We Should Expect