Which of the following is/are a necessary condition for market efficiency? 1. Sufficient liquidity 2. Low...
Which of the following is/are a necessary condition for market
efficiency?
1. Sufficient liquidity
2. Low trading costs
3. A large number of profit-seeking investors
A
Only 1
B
Only 3
C
1 and 3
D
2 and 3
E
All three
Homework Answers
Ans) E All three
Reason - Sufficient liquidity --It is major factor that is reponsible for complete trade within a short span of time and hence it is very much important for market efficiency
Low trading costs - Markets should treat every investor and trader without bias andthis can achieved by low trading costs.
A large number of profit seeking investors - Alot of people involved will have access to vast data nad market will react and the price will define the value based on all the factors making market more open and more efficient.
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The theory of market efficiency requires which of the following
assumptions?
Negligible transaction costs.
A large number of actively traded securities.
Widely available information that is quickly translated into
share price adjustments.
All of the above.
Question 11
In an efficient market,
a. security prices react quickly to new
information.
b. security analysts will not enable investors to
realize superior returns consistently.
c. one cannot make money.
d. a and b are both correct.
Which of the following statement(s) is/are false? I. In an efficient market (strong form efficiency), fundamental analysis still provides value to an investor II. Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generaly cannot make a reasonable profit. III. Retail investors prefer weak form efficiency over strong form efficiency I only O ll only Ill only O 1 & Ill only O None of the above answers
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