The efficient markets hypothesis implies that:
A) it is easy to earn above market rates of return using the appropriate investment strategies at the right time.
B) investors don't make mistakes when determining when to buy and sell stocks.
C) it is not possible to systematically pick stocks that outperform the market.
D) stock prices are never too high or too low; they always accurately reflect the underlying value of the company.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis states that it is not possible to consistently outperform the market by picking individual stocks, as all available information is already reflected in the current stock prices. Therefore, option C, which states that it is not possible to systematically pick such stocks, is the correct choice. Options A, B, and D are all inconsistent with the efficient markets hypothesis.

The Efficient Markets Hypothesis Implies That