If Stock Prices Follow a Random Walk

question 15

Multiple Choice

If stock prices follow a random walk,

• A) it implies that investors are irrational.
• B) it means that the market cannot be efficient.
• C) price levels are not random.
• D) price changes are random.
• E) price movements are predictable.

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Definitions:

Cash

Money in the form of coins or banknotes, especially that held to conduct day-to-day transactions.

Opportunity Cost

The benefit that is missed or given up when an investor, individual, or business chooses one alternative over another.

Proposed Use

An intended or suggested way of utilizing something, often laid out in plans or discussions before implementation.

Cash

Physical money, such as coins and bills, or balances in checking or savings accounts, available for use immediately.