If the Prices of Financial Assets Follow a Random Walk

question 76

Multiple Choice

If the prices of financial assets follow a random walk, then

• A)they should be easy to forecast, provided market participants have rational expectations.
• B)they should be easy to forecast, provided market participants have adaptive expectations.
• C)the change in price from one trading period to the next is not predictable.
• D)major traders in the market must not be making use of all available information about the assets.

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Definitions:

Software

Software refers to a collection of data or computer instructions that tell the computer how to work. This is in contrast to physical hardware, from which the system is built and actually performs the work.

Instructions

Directions or commands that are given to a computer or program to perform specific operations or tasks.

Hardware

The physical components or parts of a computer system, such as the CPU, RAM, hard drives, and peripherals.

Data Management

The practice of collecting, keeping, and using data securely, efficiently, and cost-effectively through a set of disciplines and techniques.