According to the Efficient Markets Hypothesis

question 51

Multiple Choice

According to the efficient markets hypothesis,

• A)common stock prices should be constant.
• B)the price of a corporation's stock is likely to fluctuate substantially in response to news about changes in the company's short-term prospects.
• C)the price of a corporation's stock will fluctuate substantially only in response to news about changes in the company's long-term prospects.
• D)price fluctuations in common stock are a response to fads and are only infrequently the result of changes in the expected profitability of the companies involved.

---

Definitions:

Drive Reduction

A motivation theory that suggests behavior is motivated by the desire to reduce internal drives of tension or arousal that arise from unmet needs.

Pleasure Principle

A psychoanalytic concept suggesting that individuals seek pleasure and avoid pain to satisfy their biological and psychological needs.

Optimal Arousal

A theory suggesting there is a level of arousal that is ideal for facilitating optimal performance on a task or activity.

Incentives

Rewards or stimuli that motivate individuals to perform actions or behaviors, often used to encourage desired outcomes.