According to Efficient Market Theory, Which of the Following Can

question 417

Multiple Choice

According to efficient market theory, which of the following can best predict the stock price of a particular company tomorrow?

• A) a finance professor who knows a lot of investment theory
• B) a stock trader who has traded stocks for more than 10 years
• C) that company's employee who has inside information about the company
• D) none of the above: Everyone has an equal chance of predicting future stock prices.

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Definitions:

Financial Advantage

The benefit gained in financial terms from a particular action or situation, often measured in terms of profit, savings, or net worth.

Practical Capacity

The maximum output that a company can produce in a real-life scenario, taking into account planned maintenance, breaks, and other non-operational activities.

Variable Cost

A cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant per unit.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.