Which statement regarding the efficient markets hypothesis is true?

A) If the stock market is weak-form efficient, then one cannot outperform the market even if he or she has private information.
B) If the stock market is semistrong-form efficient, then the expected return on stocks and bonds must be the same.
C) If the stock market is strong-form efficient, then high beta stocks must have the same expected return as low beta stocks.
D) Even though the efficient markets hypothesis (EMH) assumes that markets behave as if all investors were rational, under the EMH it is still possible to have some irrational investors in a rational market.

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bridget branda · Accepted Answer

Final Answer : D, Explanation :  The efficient markets hypothesis allows for the presence of some irrational investors as long as their trades are random and thus cancel each other out, allowing prices to reflect all available information. This means that the market can still be considered efficient even with irrational participants, as their impact is diluted by the rational actions of other investors.

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