Which one of the following statements is correct concerning market efficiency?
A)Real asset markets are more efficient than financial markets.
B)If a market is efficient, arbitrage opportunities should be common.
C)In an efficient market, some market participants will have an advantage over others.
D)A firm will generally receive a fair price when it issues new shares of stock.
E)New information will gradually be reflected in a stock's price to avoid any sudden change in the price of the stock.

Question

Quizplus · Accepted Answer

In an efficient market, prices reflect all available information. When a firm issues new shares, the price at which these shares are sold should accurately reflect the firm's value, ensuring the firm receives a fair price. This is a fundamental principle of market efficiency, where prices adjust quickly to new information, negating the possibility of arbitrage opportunities and ensuring no participant consistently outperforms the market based on information asymmetry.

Which One of the Following Statements Is Correct Concerning Market