What does the term 'random pricing errors' refer to in EMH?

In the context of the Efficient Market Hypothesis (EMH), 'random pricing errors' refer to pricing mistakes that occur without any discernible or predictable pattern. This concept implies that all available information is already reflected in the prices of securities. As a result, any deviations in price from what is considered 'correct' or 'fair' are random fluctuations rather than systematic errors or trends.

Since the market is efficient, any errors related to pricing that might benefit one party over another are considered random. Investors cannot reliably predict when these pricing errors will occur or capitalize on them consistently over time. The randomness of these errors supports the premise of EMH: that stock prices adjust rapidly to new information, leaving little opportunity for traders to exploit predictable patterns or predictable errors in pricing.

Other options describe scenarios that involve predictability or systematic benefits, which contradict the essence of random pricing errors that emphasize unpredictability and lack of bias in the market.