If the efficient markets hypothesis is true, then ?
Correct answer: B. the stock market is informationally efficient so share prices should follow a random walk
- A. shares tend to be overvalued
- B. the stock market is informationally efficient so share prices should follow a random walk
- C. All of these answers
- D. fundamental analysis is a valuable tool for increasing one's returns from investing in shares
Explanation
The efficient markets hypothesis says available information is already reflected in share prices, so predictable excess returns from fundamental analysis are difficult to obtain. Random-walk price movements are therefore the expected implication.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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