Tests of market efficiency tend to
A) look for statistical dependencies that exist in price changes over time.
B) measure the nature of the impact of new information on security prices as that new information becomes available.
C) search for trading systems that might be able to generate supernormal profits.
D) all of the above

Question

Quizplus · Accepted Answer

Tests of market efficiency can involve all of the above methods. Option A involves testing for the presence of any predictable patterns or trends in price changes over time, which can imply market inefficiencies. Option B involves examining how quickly and accurately new information is incorporated into security prices, which is a key aspect of market efficiency. Option C involves searching for trading strategies or systems that can consistently generate returns higher than what would be expected based on risk factors, which is not possible in efficient markets.

Tests of Market Efficiency Tend to