Question

Which of the following statements is TRUE?A. Efficient markets will protect investors from wrong choices if they do not diversify.B. Consistent with efficient markets, stock prices reach equilibrium several times per week.C. Efficient markets react to new information by instantly adjusting the price of a stock to its new fair market value without any delay or overreaction.D. Weak form efficiency implies that all information is reflected in stock prices.

Answer 1

The correct answer is letter "C": Efficient markets react to new information by instantly adjusting the price of a stock to its new fair market value without any delay or overreaction.

Step-by-step explanation:

Efficient markets are those where the stock price fully reflects all available and relative information at any given time. The idea comes from the efficient market hypothesis that establishes that all stock trade at their fair value because they reflect all available information so investors cannot beat the market.