Share prices will follow a random walk if ?
Correct answer: C. markets reflect all available information in a rational way
- A. shares are overvalued
- B. people behave irrationally when choosing shares
- C. markets reflect all available information in a rational way
- D. shares are undervalued
Explanation
Under informationally efficient markets, new information is rapidly incorporated into share prices, leaving price changes difficult to predict from past information. This produces the random-walk pattern.
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
It is difficult for an actively managed investment fund to outperform an index fund because ?
If a depositor puts Rs100 in a bank amount that earns 4 percent interest compounded annually, how much will be in the account after five years ?
An increase in the prevailing interest rate ?
Which of the following should cause the price of a share of stock to rise ?
If the efficient markets hypothesis is true, then ?
Compared to a portfolio composed entirely of shares a portfolio that is 50 percent government bonds and 50 percent shares will have a ?