What does the concept of market efficiency imply?

The concept of market efficiency is rooted in the Efficient Market Hypothesis (EMH), which posits that asset prices incorporate and reflect all available information at any point in time. This means that it is impossible for an investor to consistently achieve returns that exceed average market returns on a risk-adjusted basis, because any new information that could influence prices is quickly and accurately absorbed by the market.

In an efficient market, all participants have access to the same information, and therefore, prices adjust rapidly to reflect this information. This dynamic ensures that assets are fairly valued at any given time, making it difficult to find undervalued or overvalued securities consistently. The implications of this concept are significant for investors and analysts, as it shapes strategies and expectations about market behavior.

The other options do not align with the fundamental premise of market efficiency. Market prices reflecting government regulation suggests a level of manipulation rather than true market adjustment based on information. The idea that prices are always below intrinsic values contradicts the essence of efficiency, which suggests that prices should align with intrinsic values as new information becomes available. Lastly, the assertion that only large investors can influence market efficiency ignores the role that all market participants play, regardless of size, in contributing to price adjustments based on available