The Statement That Stock Prices Follow a Random Walk Implies

question 27

Multiple Choice

The statement that stock prices follow a random walk implies that

• A)the correlation coefficient between successive price changes (auto correlation) is not significantly different from zero.
• B)successive price changes are positively related.
• C)successive price changes are positively related and are negatively related.
• D)the autocorrelation coefficient is positive.

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Definitions:

Herfindahl Index

An evaluation of corporations' sizes in contrast to the overall market, pointing to the level of rivalry among them.

Price Leadership

Price leadership is a market situation where one dominant firm sets the price for goods or services in an industry, and other firms follow suit, either explicitly or implicitly.

Oligopolistic Firms

Companies operating in an oligopoly market structure, characterized by limited competition and high control over market prices.