According to the efficient-market hypothesis, changes in stock prices:
A)follow a random walk.
B)can be predicted from available information.
C)are driven by irrational waves of optimism and pessimism.
D)are based on what investors expect other investors to pay.

Question

Quizplus · Accepted Answer

According to the efficient-market hypothesis, stock prices follow a random walk, meaning that future movements cannot be predicted based on past movements, and any new information is quickly incorporated into the price through buying and selling pressure. The hypothesis suggests that all information available to investors is already reflected in the current stock price, making it impossible to consistently outperform the market through stock selection or market timing.

According to the Efficient-Market Hypothesis, Changes in Stock Prices