Answer: consistent, superior, risk-adjusted returns, net of all expenses, cannot be achieved.

## Explanation An efficient market is best described by option B: "consistent, superior, risk-adjusted returns, net of all expenses, cannot be achieved." ### Key Concepts: 1. **Efficient Market Hypothesis (EMH)**: The EMH states that security prices fully reflect all available information. In an efficient market, it's impossible to consistently achieve above-average returns on a risk-adjusted basis after accounting for transaction costs and taxes. 2. **Why Option B is correct**: - In an efficient market, prices adjust rapidly to new information - Any attempt to outperform the market through active management would be offset by transaction costs and expenses - Superior risk-adjusted returns cannot be consistently achieved 3. **Why other options are incorrect**: - **Option A**: In efficient markets, passive strategies (like index funds) are typically preferred because they have lower costs and often outperform active strategies after expenses - **Option C**: In efficient markets, price adjustments to new information occur rapidly, preventing many traders from profiting from the information ### Additional Context: - Efficient markets don't mean prices are always "correct" but that they reflect all available information - The degree of market efficiency varies across markets and over time - Three forms of market efficiency exist: weak form, semi-strong form, and strong form This question tests understanding of the fundamental concept of market efficiency in portfolio management.

Author: LeetQuiz .