Asked by Jayla Davis on Jul 11, 2024
Verified
Investors who presume that they have no insights about company value beyond the current market price and use financial statement data to assess firm-specific variables believe in the
A) market-to-market hypothesis.
B) efficient market hypothesis.
C) fundamental market hypothesis.
D) technical market hypothesis.
Efficient Market Hypothesis
A theory that suggests all existing information is fully reflected in stock prices, implying that stocks always trade at their fair value.
Firm-specific Variables
Factors that affect an individual company's stock price, operational efficiency, profitability, and risk profile, distinct from market-wide influences.
- Recognize the use of financial data by external stakeholders such as creditors, investors, and analysts.
Verified Answer
NP
Nitish PandeyJul 14, 2024
Final Answer :
B
Explanation :
The belief that current market prices reflect all available information, including firm-specific variables, is known as the efficient market hypothesis. Therefore, investors who believe this would not presume to have any insights beyond the current market price and would rely solely on financial statement data.
Learning Objectives
- Recognize the use of financial data by external stakeholders such as creditors, investors, and analysts.
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