Practice Question: Efficient Market Hypothesis

Which of the following correctly states an implication of the efficient market hypothesis?

Security prices adjust slowly to new information.
The strong form asserts that technical analysis can produce superior performance.
An investor will earn a risk-adjusted return consistent with the market.
It is difficult to produce superior performance in nonfinancial markets.

C is the answer. A is incorrect because if prices adjusted slowly to new information, then the market would not be efficient and quicker investors would be able to profit from market inefficiencies. B is incorrect; the strong form states that technical and fundamental analysis provides little benefits. D is incorrect; the efficient market hypothesis applies only to the securities markets.

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