Please determine which of the following statements are reasons why the Efficient
ID: 2793909 • Letter: P
Question
Please determine which of the following statements are reasons why the Efficient Market Hypothesis is considered a credible explanation of asset valuation. Supports the Efficient Market Hypothesis Does Not Support the Efficient Market Hypothesis Major stocks are followed daily by money managers. So many factors are involved in stock valuation, and not all factors can ever be known, such that random chance selection becomes a valid tool through which to select stocks The number of people viewing the stock as undervalued will be about the same number as those who view it as overvalued, and so they balance one another out Supply and demand sets the market priceExplanation / Answer
The statement that Supply and demand sets the market price is in accordance with the efficient market hypothesis. The reason being in efficient market hypothesis all information is captured in the market price and only demand supply mismatches affect the price of security.
Major stocks are followed by money managers in a market that does not support efficiency. This is because according to efficient market hypothesis it is impossible to beat the market and that investors would be better off by investing in passive portfolio and doesn't need money manager services.
Other two statements are right . :) .
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