If the efficient market hypothesis is true, price changes are independent and biased.

Question

Quizplus · Accepted Answer

If the efficient market hypothesis is true, price changes are independent but not biased. This is because all available information is already reflected in the market price, making it impossible for investors to consistently earn abnormal profits by exploiting any biases or patterns in price movements. Therefore, any price changes that occur are believed to reflect rational responses to new information or events, rather than being systematically skewed in one direction.

If the Efficient Market Hypothesis Is True, Price Changes Are