12 Questions
Which of the following components reflects the speed at which new information is incorporated into prices in an efficient market?
Informational efficiency
What happens to prices in an efficient market when new information is incorporated into them?
Prices increase
Why are stock prices unpredictable in an efficient market?
New information is unpredictable
Fill in the blank statement
Informational efficiency reflects the ________ at which new information is incorporated into prices.
Answer
speed
Fill in the blank statement
In an efficient market, new information is incorporated into prices in an instantaneous and ________ manner.
Answer
unbiased
Fill in the blank statement
Stock prices are unpredictable because ________ is also unpredictable.
Answer
information
Efficiency is composed of two components, one of which is ______ efficiency.
informational
In an efficient market, new information is incorporated into prices in an ______ and unbiased manner.
instantaneous
A forecast about favorable future performance leads to favorable current performance, as market participants rush to trade on new information until expected returns are exactly commensurate with ______.
risk
Test your knowledge about market efficiency with this quiz! Learn about the two components of efficiency - informational efficiency and market rationality - and how new information is incorporated into stock prices. See if you can understand why an efficient market means that it's impossible to consistently earn excess returns. Put your forecasting skills to the test with this informative quiz!
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