The ______________ states that expectations of financial prices will be equal to optimal forecasts arrived at by using all available information.

Question

Quizplus · Accepted Answer

The statement describes the rational expectations theory, which states that individuals form their expectations based on all available information and that market prices will reflect these expectations. A is incorrect because adaptive expectations theory holds that individuals form their expectations based on past trends or experiences. C and D are not relevant to the given statement.

The ______________ States That Expectations of Financial Prices Will Be