Some People Claim That Stocks Follow a Random Walk

question 28

Multiple Choice

Some people claim that stocks follow a random walk.What does this mean?

• A)The price of stock one day is about what it was on the previous day.
• B)Changes in stock prices cannot be predicted from available information.
• C)Stock prices are not determined by market fundamentals such as supply and demand.
• D)Prices of stocks of different firms in the same industry show no or little tendency to move together.

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Definitions:

Carnations

A type of flower known for its distinct, clove-like scent and its popularity as a gift or decorative plant.

Free-Trade Situation

An economic environment where goods and services can be traded across borders without regulatory barriers such as tariffs, quotas, or subsidies.

Tariff

A tax imposed on imported goods and services to regulate trade, raise government revenue, or protect domestic industries from foreign competition.

Saddles

Seats for riders on the back of an animal, typically horses, designed to support the rider's posture.