If Markets Are Efficient,when New Information About a Stock Becomes

question 25

Multiple Choice

If markets are efficient,when new information about a stock becomes available,the price will:

• A) remain unchanged because it already reflects this information.
• B) accurately and rapidly adjust to include this new information.
• C) adjust to accurately reflect this new information over the course of the next few days.
• D) most likely increase because all new information has a positive effect on stock prices.

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Definitions:

Spearman Rank-Order

A nonparametric measure of rank correlation that assesses how well the relationship between two variables can be described using a monotonic function.

Pearson Correlation

A measure of the linear correlation between two variables X and Y, giving a value between -1 and 1 which indicates the extent of their linear relationship.

Coefficient

A numerical or constant factor in a mathematical equation that multiplies a variable.

Spearman Rank-Order

An approach that doesn't rely on parameters to gauge the correlation of ranks, examining the extent to which a monotonic function can accurately represent the linkage between two variables.