To say that a stock price is a signal means that:
A) society can determine the value of a firm.
B) people transfer firm ownership via the signals.
C) lower stock prices imply better value.
D) speculative bubbles can be avoided.

Question

Quizplus · Accepted Answer

A stock price is a signal in the sense that it reflects society's perception of the value of a firm. However, this perception may not always be accurate, as stock prices can be influenced by factors such as speculation and market sentiment. The stock price reflects demand and supply conditions of the market and not necessarily the fundamental value of the company.

To Say That a Stock Price Is a Signal Means