If the efficient market hypothesis holds, investors should expect
A)to receive a fair price for their security.
B)to earn a normal rate of return on their investments.
C)to be able to pick stocks that will outperform the market.
D)to receive a fair price for their security and to earn a normal rate of return on their investments.

Question

Quizplus · Accepted Answer

According to the efficient market hypothesis, all available information is already reflected in security prices, making it impossible for investors to consistently outperform the market. Therefore, investors can expect to receive a fair price for their security based on its true value and earn a normal rate of return on their investments. Choice D is the best option as it includes both of these expectations.

If the Efficient Market Hypothesis Holds, Investors Should Expect