If financial markets are efficient, then:
A)there is reason to believe that prices are too high or too low
B)it is possible to profit regularly from analysing publicly available information
C)prices will adjust quickly to correctly reflect new information
D)there will be periods where expectations are too bullish and too bearish
E)historical price trends will give you a good idea of where prices are headed in the near future.

Question

Quizplus · Accepted Answer

If financial markets are efficient, it means that all relevant information is already reflected in market prices. Therefore, any new information that becomes available will be quickly reflected in the prices, and prices will adjust quickly to correctly reflect this new information. This is why choice C is the best answer. Choices A, B, D, and E imply that prices are not fully efficient, which goes against the assumption that the markets are efficient.

If Financial Markets Are Efficient, Then