Which of the following is the best definition for the concept of efficient markets hypothesis (EMH) ?

A) The return earned in an average year over a multi-year period.
B) The hypothesis is that actual capital markets are efficient.
C) The average squared deviation between the actual return and the average return.
D) Statistical measure of maximum loss used by banks and other financial institutions to manage risk exposures.
E) The positive square root of the variance.

Efficient Markets Hypothesis

A theory that suggests that financial markets are “informationally efficient,” meaning that asset prices always reflect all available information.

Actual Capital Markets

Real-world financial markets where savings and investments are transferred between suppliers who have capital and those who are in need of capital.

Statistical Measure

A quantitative representation that describes a characteristic of a data set or population, such as mean or standard deviation.