The efficient markets hypothesis

True or False: The efficient markets hypothesis holds only if all investors are rational.

True

False

Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to "beat" the market and earn excess $($or abnormal$)$ returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices.

Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement:

Tips

This statement is consistent with:

Strong form efficiency

Weak form efficiency