If the Financial Markets Are Efficient Then

question 92

Multiple Choice

If the financial markets are efficient then:

• A) stock prices should remain constant.
• B) stock prices should increase or decrease slowly as new events are analyzed and the information is absorbed by the markets.
• C) an increase in the value of one security should be offset by a decrease in the value of another security.
• D) stock prices will only change when an event actually occurs, not at the time the event is anticipated.
• E) stock prices should only respond to unexpected news and events.

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Definitions:

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus.

Flashbulb Memory

Highly detailed and vivid memory of the circumstances surrounding a particularly shocking or emotional event.

Memory Consolidation

The method through which transient memories become long-term, ensuring their stability and permanence.

Priming

The process by which exposure to one stimulus influences the response to a subsequent stimulus, without conscious guidance.