According to the efficient markets 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 markets hypothesis, changes in stock prices follow a random walk and cannot be predicted from available information. This means that past prices and trends cannot be used to predict future prices and trends, and that any new information that comes to light will be immediately reflected in the stock price. The hypothesis suggests that stock prices always reflect all available information, and therefore cannot be driven by waves of irrational optimism or pessimism or by what investors expect other investors to do.

According to the Efficient Markets Hypothesis, Changes in Stock Prices