Question

Which of the following is TRUE of efficient-market hypothesis?

		Since stocks are fully and fairly priced, it follows that investors should not waste their time trying to find and capitalize on miss-priced (undervalued or overvalued) securities.
		Securities are typically in disequilibrium, meaning they are fairly priced and their expected returns are more than their required returns.
		At any point in time, security prices fully reflect all internal information available about the firm and its securities, and these prices are insensitive to new information.
		Insider trading scandals have proven that stocks are not fully and fairly priced; as a result, it would be worthwhile for investors should spend time searching for mispriced (over- or undervalued) stocks.

Answer 1

( Answer)

Since stocks are fully and fairly priced, it follows that investors should not waste their time trying to find and capitalize on miss-priced (undervalued or overvalued) securities.