- CFA Exams
- CFA Exam: Level I 2021
- Study Session 12. Equity Investments (1)
- Reading 38. Market Efficiency
- Subject 1. The Concept of Market Efficiency
CFA Practice Question
Which of the following statements is true concerning the efficient market hypothesis?
II. Firms' securities sell at their "fair" value.
III. Financial investors cannot earn a positive return.
I. Equilibrium rates of return prevail.
II. Firms' securities sell at their "fair" value.
III. Financial investors cannot earn a positive return.
Correct Answer: I and II
User Contributed Comments 4
| User | Comment |
|---|---|
| saltnvinegar | what will be equilibrium rates of return here?? |
| gkobylko | I guess, no one can obtain above average risk-adjusted basis return |
| kutta2102 | The equilibrium rate is the long term arithmentic mean for an index. For example, if you plotted the yearly stock returns for DJIA for the last 50 years and drew a line, it will show that while some years had greater returns compared to others, on the whole the returns will be in the equilibrium rate ballpark. |
| cong | Adjustment to equilibrium rate is inevitable in the long run. |