Rules Used to Predict Movements in Stock Prices Based on Past

question 48

Multiple Choice

Rules used to predict movements in stock prices based on past patterns are,according to the efficient markets theory,

• A) a waste of time.
• B) profitably employed by all financial analysts.
• C) the most efficient rules to employ.
• D) consistent with the random walk hypothesis.

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Definitions:

Fair Value

An estimated market value of an asset or liability, based on current prices in an active market or valuation techniques.

GAAP

Widely Recognized Accounting Standards; a set of standard accounting practices and rules routinely adhered to for financial reporting purposes.

Fair Value Accounting

An accounting approach where assets and liabilities are recorded at their current market value, not just historical cost.

Valuation Allowance

An allowance against deferred tax assets indicating that it is more likely than not that some portion or all of the deferred tax asset will not be realized.