Question

Which one of the following best describes the term "efficient market"?A) The commissions on large transactions are smaller than the commissions on small transactions.B) New information is quickly reflected in security prices.C) Little time and effort are spent on marketing securities to the public.D) The cost of receiving, processing, executing, and reporting securities orders is small.

Answer 1

Answer: Option B

Explanation: In simple words, the market in which the price of the securities reflect all the information that is relevant to the the investor is called an efficient market. No investor can beat such markets as no security is undervalued or overvalued.

This accuracy in pricing could only be maintained when all the participants are fully aware of new information which is possible only if the information is quickly spread in the market.

Hence the correct option is B.