Question

Under the efficient markets hypothesis, stock prices take a random walk around their current prices. True/False?

Under the efficient markets hypothesis, stock prices take a random walk around their current prices. True/False?

Homework Answers

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

As per Efficient market hypothesis:

The security prices already reflect all the available information.

The efficient market hypothesis says that past price movement, earnings report and volume traded doesn't affect stocks Current price and can't be used to predict the stocks future directions.

In simple words, past performance doesn't guarantee the future performance of the stock price moment. The stock price follows Brownian motion. That is stock price moment is random that's why it's also called as random walk theory.

So in an efficient market “Stock returns follow a random walk process.”

Answer: True.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
According to the efficient markets hypothesis are stock prices predictable? Why? And what is a random...
According to the efficient markets hypothesis are stock prices predictable? Why? And what is a random walk?
If stock prices follow a random walk, future stock prices are easy to predict. (true or...
If stock prices follow a random walk, future stock prices are easy to predict. (true or false explain) The CAPM tells us that any person who seeks a large expected return must be willing to assume proportionately greater total risk(true or false explain)
Efficient markets mean that security prices change randomly and thus for no reason. True or false....
Efficient markets mean that security prices change randomly and thus for no reason. True or false. Explain.
Discuss whether the following statements are true or false with supporting explanations, if stock prices follow...
Discuss whether the following statements are true or false with supporting explanations, if stock prices follow a random walk pattern: Successive stock prices are not related.                                                              Successive stock price changes are not related.                                                  Stock prices fluctuate above and below a normal long – run price.                                The history of stock prices cannot be used to predict future returns for investors.     
True, False, or Uncertain (select one and defend your selection): “Stock returns follow a random walk...
True, False, or Uncertain (select one and defend your selection): “Stock returns follow a random walk process.” Explain.
The Stock Market and Efficient Markets True/False 1. Expectations that are formed solely on the basis...
The Stock Market and Efficient Markets True/False 1. Expectations that are formed solely on the basis of past information are know as rational expectations. 2. The theory of rational expectations argues that optimal forecasts need not be perfectly accurate. 3. An important implication of rational expectation theory is that when there is a change in the way a variable behaves, the way expectations of this variable are formed will change as well. 4. If the optimal forecast of a return...
if the stronger version of the efficient market hypothesis is true, so that stock prices reflect...
if the stronger version of the efficient market hypothesis is true, so that stock prices reflect the true fundamental value of the stock, the strategy that most investors should use when investing is to a) invest solely in mutual funds b) follow the tips from the most prominent financial advisors c) continuously buy and sell of stocks d) buy and hold a diversified set of stocks suppose that your investment advisor calls you and tells you that a certain stock...
6) Strong-form efficient markets theory proclaims that ________. A) one can chart historical stock prices to...
6) Strong-form efficient markets theory proclaims that ________. A) one can chart historical stock prices to predict future stock prices such that you can identify mispriced stocks and routinely outperform the market B) one can exploit publicly available news or financial statement information to routinely outperform the market C) current prices reflect the price and volume history of the stock, all publicly available information, and all private information D) current prices reflect the price and volume history of the stock,...
The portfolio is likely to do better than the market if stock prices increase, and worse...
The portfolio is likely to do better than the market if stock prices increase, and worse than the market if stock prices decrease. true or false explain If stock prices follow a random walk, future stock prices are easy to predict. (true or false) explain
According to which form(s) of the Efficient Markets Hypothesis will the price of Stock B immediately...
According to which form(s) of the Efficient Markets Hypothesis will the price of Stock B immediately adjust by the correct amount (there is no under- or overreaction), when a brand new piece of information about Stock B becomes public? Choose the best answer below. Select one: The weak form The semi-strong form The strong form The weak and semi-strong forms The weak and strong forms The semi-strong and strong forms The weak, semi-strong, and strong forms