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.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Microeconomics
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.
Practise Microeconomics
1,742 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Microeconomics questions
Which of the following should cause the price of a share of stock to rise ?
Share prices will follow a random walk if ?
It is difficult for an actively managed investment fund to outperform an index fund because ?
Compared to a portfolio composed entirely of shares a portfolio that is 50 percent government bonds and 50 percent shares will have a ?
Idiosyncratic risk is the ?
Which of the following does not help reduce the risk that people face ?