Efficient Capital Market..

In an efficient capital market, which of the following statements is most accurate? a. All capital assets will be priced to produce the same return. b. All investors will earn the same return in the long run. c. The expected net present value of all possible investments within the market will be zero. d. The expected returns of NYSE specialists should be no different from those of other investors. - Dinesh S



Whats wrong with C?

D too

d for me too

I think C is wrong, it should say the expected NPV is 0,not simply to state “NPV”. the price of the security is ever changing,NPV of the a stock is not certain,not mention to be 0

The correct answer to the above question is C here’s one more… Which of the following can be used to support the strong form of the efficient market hypothesis (EMH)? a. Event studies. b. Cross-sectional studies. c. Dividend yield studies. d. Studies of SEC insider trading data. Man, I know really believe that I could had done better in the betting industry than just guessing on these questions… “bet where the money lies…” - Dinesh S

I have no idea about this. My first guess is D, second one is A…


D. i think a-c all deal with semistrong form.


Answer is ‘A’ I thought Event Studies were Semi-Strong supporters, there is no mention about it extending support to Strong form as well… - Dinesh S

I am pretty sure its not A & B, they are for semi-strong, C is an anomaly, but not sure how that relates to the question, its a coin toss and I guess D won.

Dinesh, the answer to the second question you posted is really A? How can that be? I thought the strong form of EMH says that current stock price includes even inside information, so how would one ever be able to study such a strong-form EMH hypothesis without considering data from known SEC insider trades?

Thats what I am wondering, stratus !! why is Event studies considered a test for Strong form. In schweser Notes, It clearly classified Event Studies as a test for Semi-Strong form of EMH - Dinesh S

yea exactly! i thought it was event, time series and cross sectional for semi - strong.

dinesh where are these questions from?

cielito, these are from passmaster

I don’t know that much about that guys when I posted A i thought about the fact that the strong form of ECM states that prices include all public, historical and insider information. therefore you could not get excess returns if you had that stuff. the only way you could get excess returns is by using something not anticipated like an event in the life of the company but the maybe A is the wrong answer