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30. Efficient markets follow… a. Brownian motion b. Martingale (Brownian motion around a positive trendline) c....

30. Efficient markets follow…

a. Brownian motion

b. Martingale (Brownian motion around a positive trendline)

c. All of the above

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Answer #1

30. The correct answer is option a. Brownian motion

Efficient markets follow Brownian motion meaning the path of the stock market is truely random in nature. In an efficient market no prediction can be made regarding how the prices behave in the market.

Option b is incorrect because in an efficient market it is not possible to predict the direction of the market so it is incorrect to say that the efficient markets follow Brownian motion around a positive trendline (Martingale).

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