The Efficient Markets Hypothesis Predicts That Stock Prices Follow a "Random

question 32

Multiple Choice

The efficient markets hypothesis predicts that stock prices follow a "random walk." The implication of this hypothesis for investing in stocks is

• A)a "churning strategy" of buying and selling often to catch market swings.
• B)turning over your stock portfolio each month,selecting stocks by throwing darts at the stock page.
• C)a "buy and hold strategy" of holding stocks to avoid brokerage commissions.
• D)following the advice of technical analysts.

---

Definitions:

Margin of Error

A measure of the range of values below and above the sample statistic in a confidence interval within which the true population parameter is expected to lie.

Sample Mean

The mean of a set of samples, obtained by adding all the values together and then dividing by the total count of observations.

Weekdays

The days of the week typically considered as working days, usually Monday through Friday, excluding the weekend.

Sampling Distribution

A statistical function that describes all the possible values and likelihoods that a statistic can take within a given range.