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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.

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Answer #1

Efficient market hypothesis means that share price of a company reflect all such public as well as privately available past informations. It explains that one cannot beat the index.

Efficient market hypothesis is a supporter of random walk hypothesis theory which advocates that stock prices only reacts to the new informations and since new information are not known at the present the stock shows random movements, efficient market hypothesis advocates that prices change randomly and for no reason.

So the given statement is a TRUE statement because efficient market hypothesis believes that security prices changes randomly for no particular reason because of random walk hypothesis theory.

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