Author Question: If capital markets are efficient, then (Read 25 times)

jace · **on:** Apr 25, 2021

Question 1

An efficient capital market is one in which
◦ security prices reflect available information.
◦ risky securities offer a positive rate of return to investors.
◦ information is distributed fairly.
◦ after-tax returns are equalized.
◦ prices fluctuate smoothly.

Question 2

If capital markets are efficient, then
◦ there is no reason to believe that prices are too high or too low.
◦ it is not possible to make money by playing the stock market.
◦ prices will adjust slowly when reacting to new information.
◦ historical price trends will give you a good idea of where prices are headed in the future.
◦ it is possible to profit regularly from publicly available information.

GCabra · **Reply #1 on:** Apr 25, 2021

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