In an efficient market,the price of a security will:
A)react immediately to new information with no further price adjustments related to that information.
B)react to new information over a two-day period after which time no further price adjustments related to that information will occur.
C)rise sharply when new information is first released and then decline to a new stable level by the following day.
D)always rise immediately upon the release of new information with no further price adjustments related to that information.
E)be slow to react for the first few hours after new information is released allowing time for that information to be reviewed and analyzed.

Question

Quizplus · Accepted Answer

In an efficient market, the price of a security will react immediately to new information and adjust to the new information without any further adjustments. This is because all available information is already reflected in the price of the security, making it difficult to arbitrage and profit from any price differences. Thus, the price responds immediately and efficiently to any new information.

In an Efficient Market,the Price of a Security Will