Question

A.3 The model used to determine equity prices in this course relies heavily on the efficient markets theory, which posits that current prices embody all relevant information.

indicate whether it's true, false or uncertain and explain the reason.

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Answer #1

The theory of efficient market presumes that markets for securities are efficient so that each and every agent have equal access to all the available information and that asset prices reflect all available information. This implies that no investment advice related to the picking up of specific stocks can outperform the market as a whole.

Hence the statement is true.

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