Under the Concept of an Efficient Market, a Random Walk

question 43

Multiple Choice

Under the concept of an efficient market, a random walk in stock prices means that:

• A)there is no driving force behind price changes.
• B)technical analysts can predict future price movements to earn excess returns.
• C)the unexplained portion of price change in one period is unrelated to the unexplained portion of price change in any other period.
• D)the unexplained portion of price change in one period that can not be explained by expected return can only be explained by the unexplained portion of price change in a prior period.
• E)None of the above.

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Definitions:

Social Theory

A framework or set of ideas that aims to explain how societies function, change, and develop.

Indirect Costs

Expenses not directly attributable to a specific product or service but necessary for the general operation of a business.

Deontological Theories

Ethical theories positing that the morality of an action depends on its adherence to rules or duties, regardless of the outcome.

Motives

The reasons or driving forces behind individuals' actions or decisions.