If Stock Prices Follow a Random Walk

question 15

Multiple Choice

If stock prices follow a random walk,

• A) it implies that investors are irrational.
• B) it means that the market cannot be efficient.
• C) price levels are not random.
• D) price changes are random.
• E) price movements are predictable.

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Definitions:

Economies Of Scale

Operational scale increases lead to cost efficiencies for businesses, prominently reflecting in reduced production costs per unit as the amount of output grows.

Diseconomies Of Scale

The situation when a firm’s average total cost of producing a product increases in the long run as the firm increases the size of its plant (and, hence, its output).

Technologically Progressive

Characterized by innovative application of knowledge and technology to improve products, services, or processes.

Nondiscriminating

Nondiscriminating, in economic terms, often refers to pricing or marketing policies that do not vary between different consumers or groups, treating all participants equally.