Which of the following would be inconsistent with an efficient market?
A) Information arrives randomly and independently.
B) Stock prices adjust rapidly to new information.
C) Price changes are independent.
D) Price changes are random.
E) Price adjustments are biased.

Question

Quizplus · Accepted Answer

Efficient markets imply that all available information is quickly and accurately reflected in stock prices, which means that price changes should not be biased or predictable. If price adjustments are biased, it would suggest that not all relevant information is being incorporated into the market price, which would be inconsistent with market efficiency. All the other choices (A, B, C, and D) are generally consistent with efficient markets.

Which of the Following Would Be Inconsistent with an Efficient