The Efficient Markets Hypothesis Predicts That an Investor

question 25

Multiple Choice

The efficient markets hypothesis predicts that an investor

• A)will not be able consistently to earn above-normal profits from buying or selling stocks.
• B)will be able consistently to earn above-normal profits from buying or selling stocks so long as he or she makes use of rational expectations.
• C)will be able consistently to earn above-normal profits from buying or selling stocks so long as he makes us of adaptive expectations.
• D)will be able consistently to earn above-normal profits so long as stock prices in general are rising.

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Definitions:

Shareholder Relations

The management of interactions and communications between a corporation and its shareholders.

Managerial Accounting

Identifying, measuring, evaluating, and reporting financial details to managers to assist in attaining organizational aims.

GAAP

GAAP stands for Generally Accepted Accounting Principles, which are a collection of commonly-followed accounting rules and standards for financial reporting.

Estimates

Approximations or educated guesses used in accounting to record transactions where the exact amounts cannot be determined.