an efficient capital market is best defined as a market in which security prices reflect which one of the following?
An efficient capital market is best defined as a market in which security prices reflect which one of the following?
Answer:
An efficient capital market is best defined as a market in which security prices reflect all available information. This concept is known as the Efficient Market Hypothesis (EMH). According to EMH, it is impossible to consistently achieve returns in excess of average market returns because, at any given time, security prices fully reflect all available information. This means that new information is rapidly and accurately incorporated into security prices, making it difficult for investors to gain an advantage. There are three forms of market efficiency under the EMH: weak form, semi-strong form, and strong form efficiency, each representing the different levels of information reflected in security prices.