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:

Rigid Requirements

Strict, inflexible criteria or conditions that must be met or adhered to.

Right-tailed Wilcoxon Rank Sum Test

A non-parametric statistical test used to compare two independent groups to determine if one group's median is significantly greater than the other group's median.

Test Statistic

A value derived from sample data used in a hypothesis test to determine whether to reject the null hypothesis.

Wilcoxon Rank Sum Test

A statistical test that does not rely on parameter assumptions to compare two separate samples and ascertain if they originate from an identical distribution.