Question

1. Which of the following statements is most accurate:

1. Eugene Fama developed a framework for describing the degree to which markets are efficient. In his efficient market hypothesis, markets are efficient when prices reflect relevant information at any point in time.
2. A price discrepancy must be sufficiently large to leave the investor with a profit (adjusted for risk) after taking account of the transaction costs and information-acquisition costs to reach the conclusion that the discrepancy may represent a market inefficiency.
3. In the weak form of the efficient market hypothesis, security prices fully reflect all past market data, which refers to all historical price.
4. When creating a security market index, the target market determines the number of securities to be included in the index.

Answer 1

Ans. option A. Seems more accurate

Eugene F. Fama defined a market to be “informationally efficient” if prices at each moment incorporate all available information about future values. Informational efficiency is a natural consequence of competition, relatively free entry, and low costs of information.

Other options be like...

weak form efficiency believe all current information is reflected in stock prices and past information has no relationship with current market prices.

When creating a security market index, it is ess ential to determine target market first