The efficient markets hypothesis assumes all of the following except : A. the pr
ID: 2612388 • Letter: T
Question
The efficient markets hypothesis assumes all of the following except: A. the price of a stock always equals the best estimate of its value. B. stock prices follow a random walk. C. a stock's worth is the present value of expected dividends. D. stock pickers can identify undervalued stocks. The efficient markets hypothesis assumes all of the following except: A. the price of a stock always equals the best estimate of its value. B. stock prices follow a random walk. C. a stock's worth is the present value of expected dividends. D. stock pickers can identify undervalued stocks.Explanation / Answer
B - stock prices follow a random walk.
The efficient markets hypothesis assumes that there is no way to earn excess profits because current stock prices fully reflect available information about the value of the firm.