Final answer:
The correct answer to the student's question about the effects of active trading and securities analysts on markets is D. I, II, and III, since active trading promotes informational efficiency, risk compensation, and challenges in consistently finding mispriced securities.
Step-by-step explanation:
The student's question concerns how active trading and competition among securities analysts impact market efficiency, risk pricing, and the likelihood of consistently finding mispriced securities. These elements relate to the concepts of informational efficiency, risk compensation, and market efficiency. Specifically, the informational efficiency of securities prices ensures that all available information is reflected in the market price, making it hard to consistently find under- or overvalued securities. The requirement for riskier securities to offer higher potential returns is based on the principle that investors need to be compensated for taking on additional risk.
Thus, the correct answer to the student's multiple-choice question, which sought to identify the market conditions that are likely to result from active trading and competitive analysis, is D. I, II, and III, as all listed statements are outcomes of these market behaviors.