The volatility of stock prices,particularly in the short-run,may,according to Professor S.Grossman,be due to
A) large numbers of stockholders fearful of losing wealth who sell at some predetermined level.
B) some traders being better informed than others about real financial conditions.
C) either or both of the above.
D) the increasing use of stock options as compensation for corporate executives.

Question

Quizplus · Accepted Answer

Both A and B are valid reasons for the volatility of stock prices in the short-run. Fearful stockholders may sell at lower prices, causing a sudden drop in stock prices, while better-informed traders can cause fluctuations in stock prices based on their knowledge of real financial conditions. Therefore, the correct choice is C, which includes both possibilities. Option D may indirectly contribute to stock price volatility but is not a primary reason.

The Volatility of Stock Prices,particularly in the Short-Run,may,according to Professor