QUESTION 1 10 points Save Answer Explain why investors recei

QUESTION 1 10 points Save Answer Explain why investors receive exactly what they pay for in a totally efficient market For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac) T T T ? Paragraph Arial Mn Words Path:o Click Save and Submit to save and submit. Click Save All Ansvers to save all answers. Save All Answers Save and Submit 0 Type here to search 0

Solution

The efficient market hypothesis (EMH) maintains that all stocks are perfectly priced according to their inherent investment properties, the knowledge of which all market participants possess equally. EMH asserts that the market is able to correctly price securities in a timely manner based on the latest information available. Based on this principle, there are no undervalued stocks to be had since every stock is always trading at a price equal to its intrinsic value.

The implication of EMH is that investors shouldn\'t be able to beat the market because all information that could predict performance is already built into the stock price. It is assumed that stock prices follow a random walk, meaning that they\'re determined by today\'s news rather than past stock price movements.