Question

In an informationally efficient capital market: Group of answer choices security prices quickly reflect new information. investors react to all information releases rapidly. active managers can generate abnormal profits.

Answer 1

security prices quickly reflect new information.

Step-by-step explanation:

A capital market is one where there is sale of securities and other company equity.

When information flow is restricted the market is said to be inefficient. The few people with access to information use it to make profit.

An efficient market is one where everyone has access to information about securities being sold. Because of this the securities that are not going to perform are known by investors resulting in low prices.

Securities that are high performing are quickly identified and price of such security rises.

Answer 2

security prices quickly reflect new information.

Step-by-step explanation:

In 1969, Eugene Fama proposed the informationally efficient capital market. It can be defined as a type of market in which all information relating to a stock portfolio of an organization would be incorporated into its current price.

Hence, in an informationally efficient capital market security prices quickly reflect new information.

This ultimately implies that, a capital market is said to be efficient when all the informations about securities (stocks) are fully reflected in its prices.