Which of the following is an implication of market efficiency?
A) Resources are allocated among firms that put them to the best use.
B) No investor will do better than the S&P 500 in any time period.
C) No investor will do better than the S&P 500 consistently after adjusting for risk.
D) No investor will do better than the S&P 500 consistently after adjusting for risk and transactions costs.

Question

Quizplus · Accepted Answer

Market efficiency implies that all available information is reflected in stock prices, making it difficult for investors to consistently outperform the market after adjusting for risk and transaction costs. Therefore, the correct statement is that no investor will do better than the S&P 500 consistently after adjusting for risk and transaction costs. Choices A and B are not implications of market efficiency, while choice C is partially correct but does not take transaction costs into account.

Which of the Following Is an Implication of Market Efficiency