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Which of the following statements is/are correct? Statement A: If stock markets are efficient, investors earn...

Which of the following statements is/are correct?

Statement A: If stock markets are efficient, investors earn no returns.

Statement B: Majority of people who work in Wall Street encourage active trading; so they believe that the stock markets are efficient.

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Answer #1

Both The statements are wrong.

Statement 1 - If markets are efficient then it means that all extra information gets reflected in the stock price very quickly and the securities are rightly priced. So you will earn the market return but can't earn alpha. So its better to do passive trading than active.

Statement 2 - Wall street believes that market are inefficient, that the stocks are not perfectly priced, so there is scope of active return. As securities are either over-priced or under-priced

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