Question

How can prices change constantly in an efficient market?

A. New information changes expected and/or required returns requiring traders to buy or sell

B. Traders receive information at different times so their trades cause prices to fluctuate

C. In an efficient market there are enough traders that everyone has a different idea of what the correct price is, so the price is always moving

D. Prices can't change constantly if a market is efficient

Answer 1

Meaning of Efficient Market: It means market price will refelect all available relevant information. If market are efficient all then all information is already incorporated into prices.

So Price change constantly in an efficient market

B) Traders receive information at different times so their trades cause prices to fluctuate- Valid

Because when information receive at different times price f

A) New information changes expected and/or required returns requiring traders to buy or sell- Invalid

with information customer will buy or sell depends upon customer. so trader can expect return only when customer buy goods . So  return is not in hand of trader .

B) Traders receive information at different times so their trades cause prices to fluctuate- Valid

Because on stockexchange all informaion of share prices available whih causes to fluctuate

C) In an efficient market there are enough traders that everyone has a different idea of what the correct price is, so the price is always moving- Invalid

Because every information is   not depends upon assumptions

D) Prices can't change constantly if a market is efficient- Invalid

Because it is assumption in efficient market that price move or change.

Conclusion: SO in the end we can say B point is valid price change constantly