With respect to the notion that stock prices follow a random walk,many researchers have concluded that:
A) stock prices reflect a majority of available information about the firm.
B) successive price changes are predictable.
C) past stock price changes provide little useful information about future stock price changes.
D) stock prices always rise excessively in January.

Question

Quizplus · Accepted Answer

Studies have shown that past stock price changes do not provide any useful information about future stock price changes, indicating that stock prices do not follow a predictable pattern or trend. The random walk hypothesis suggests that future stock prices cannot be predicted based on past prices and that stock prices reflect all available information about the firm, indicating that choice A is correct. However, there is no evidence to support the idea that stock prices always rise excessively in January, making choice D incorrect.

With Respect to the Notion That Stock Prices Follow a Random