Efficient financial markets fluctuate continuously because:

• A. new information is constantly being incorporated into security prices
• B. accounting standards require daily revaluation of all assets
• C. investors are required to trade at fixed intervals
• D. government regulations mandate frequent price changes

Answer: (A)

Verified step by step guidance

1. Understand the concept of efficient financial markets: Efficient financial markets are those where security prices fully reflect all available information at any given time.
2. Analyze the options provided in the problem: Evaluate each statement to determine which aligns with the concept of efficient financial markets.
3. Option 1: 'New information is constantly being incorporated into security prices' - This is a key characteristic of efficient markets, as prices adjust rapidly to reflect new information.
4. Option 2: 'Accounting standards require daily revaluation of all assets' - This is not directly related to market efficiency but rather to accounting practices.
5. Option 3 and 4: 'Investors are required to trade at fixed intervals' and 'Government regulations mandate frequent price changes' - These statements do not align with the concept of efficient markets, as market efficiency is driven by information flow, not trading requirements or regulations.