Asked by Mallory Connell on Jun 20, 2024
Verified
According to the efficient markets hypothesis, stocks follow a random walk so that stocks that increase in price one year are more likely to increase than decrease in the next year.
Efficient Markets Hypothesis
A theory stating that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns than the average market return.
Random Walk
The path of a variable whose changes are impossible to predict.
- Grasp the implications of the efficient markets hypothesis for stock selection.
Verified Answer
VS
Victoria SandovalJun 23, 2024
Final Answer :
False
Explanation :
The efficient markets hypothesis suggests that stock prices fully reflect all available information, meaning future price movements are unpredictable and do not depend on past trends. Stocks following a random walk implies that past movements do not predict future directions, contradicting the idea that stocks increasing in price one year are more likely to increase in the next.
Learning Objectives
- Grasp the implications of the efficient markets hypothesis for stock selection.
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