Under the Concept of an Efficient Market, a Random Walk

question 43

Multiple Choice

Under the concept of an efficient market, a random walk in stock prices means that:

• A)there is no driving force behind price changes.
• B)technical analysts can predict future price movements to earn excess returns.
• C)the unexplained portion of price change in one period is unrelated to the unexplained portion of price change in any other period.
• D)the unexplained portion of price change in one period that can not be explained by expected return can only be explained by the unexplained portion of price change in a prior period.
• E)None of the above.

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Definitions:

Foreign Stock

refers to shares of a company based outside the investor's own country.

Private Sector

The part of the economy that is owned and controlled by individuals and companies for profit rather than by the state.

Financial Difficulties

Situations where individuals or organizations are unable to meet financial obligations due to insufficient funds.

Government Bonds

Debt securities issued by governments to finance public expenditure, offering periodic interest payments and principal repayment at maturity.