If the Prices of Financial Assets Follow a Random Walk

question 76

Multiple Choice

If the prices of financial assets follow a random walk, then

• A)they should be easy to forecast, provided market participants have rational expectations.
• B)they should be easy to forecast, provided market participants have adaptive expectations.
• C)the change in price from one trading period to the next is not predictable.
• D)major traders in the market must not be making use of all available information about the assets.

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Definitions:

Sternberg

Refers to Robert Sternberg, an American psychologist and psychometrician best known for his theory on intelligence and creativity.

Renowned Poet

A highly recognized and distinguished poet, celebrated for their significant contributions to poetry.

Analytical

Pertaining to or proceeding by analysis (i.e., separating a whole into its constituent parts to examine or determine their relationship).

Practical

Concerned with actual use or practice rather than with theory or speculation.