Financial managers must be cognizant of market efficiency because:
A)manipulating earnings by accounting changes does not fool the market.
B)timing security sales is futile because without private information the current price reflects all known information.
C)there is limited price pressure from any large sale of stock depressing prices momentarily which then recover to prior levels.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

All of the above statements are true regarding market efficiency. Financial managers need to consider the efficient market hypothesis when making decisions about manipulating earnings, timing security sales, or any other investment-related activity because the market reflects all known information and any attempts to outperform the market without private information are generally futile. Additionally, any large sale of stock will have limited price impact due to the efficient market.

Financial Managers Must Be Cognizant of Market Efficiency Because