If in an Efficient Market All Prices Are Correct and Reflect

question 60

Multiple Choice

If in an efficient market all prices are correct and reflect market fundamentals,which of the following is a FALSE statement?

• A)A stock that has done poorly in the past is more likely to do well in the future.
• B)One investment is as good as any other because the securities' prices are correct.
• C)A security's price reflects all available information about the intrinsic value of the security.
• D)Security prices can be used by managers to assess their cost of capital accurately.

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Definitions:

Respondent Behavior

A type of reaction to certain stimuli that is automatic or reflexive, not under voluntary control, typically conditioned through association.

Spontaneous Recovery

The reappearance of a learned response after its apparent extinction, without the need for further conditioning or training.

Fixed-Ratio

A schedule of reinforcement where a response is rewarded only after a specified number of responses, in behavioral psychology.

Fixed-Interval

A schedule of reinforcement where rewards are given after a predetermined interval of time has passed.