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.

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Definitions:

Conflict Buying Time

A strategy used in conflict resolution where time is intentionally taken before responding or making a decision, to allow for de-escalation and thoughtful consideration.

Defense Mechanism

Psychological strategies used unconsciously to protect oneself from anxiety arising from unacceptable thoughts or feelings.

Negativism

An aggressive mechanism in which a person responds with pessimism to any attempt at solving a problem.

Pessimism

A tendency to see the worst aspect of things or believe that the worst will happen; a lack of hope or confidence in the future.