Which of the following is NOT correct with regards to the Efficient Markets Hypothesis?

A) The EMH suggests that there are no positive NPV investments, on average.
B) The EMH asserts that information has been "priced out" of stocks.
C) The EMH refers to well-organized capital markets.
D) The EMH suggests that the prices on the TSX are fair, on average.
E) The EMH suggests that markets in which prices fluctuate a great deal cannot be efficient.

Question

Yessenia Mauricio · Accepted Answer

Final Answer : E, Explanation :  The Efficient Markets Hypothesis (EMH) posits that asset prices fully reflect all available information, meaning that it is impossible to consistently achieve higher returns than the overall market through stock picking or market timing. The statement that markets in which prices fluctuate a great deal cannot be efficient is incorrect because the EMH does not necessarily relate the efficiency of a market to the volatility of its prices. Price fluctuations in a market can be a result of new information being rapidly incorporated into prices, which is consistent with the EMH.

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