Which of the Following Findings Would Support the Naive-Investor Hypothesis

question 52

Multiple Choice

Which of the following findings would support the naive-investor hypothesis?

• A)A finding that security prices respond to income levels that differ solely because of alternative accounting methods with no cash flow consequences.
• B)A finding that security prices do not respond to artificial book-income differences.
• C)A finding that security prices do not respond to the adoption of LIFO for accounting for inventories and cost of goods sold.
• D)A finding that security prices do not respond to a change in reported accounting earnings from the prior year.

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Definitions:

Always

At all times; on all occasions, indicating consistency or continuity.

Predict

To make a statement about what will happen in the future based on past experience or evidence.

Eliminate

To remove or take away someone or something from consideration, or to put an end to; eradicate.

Often

A term indicating frequency, typically used to describe how regularly an event or action occurs.