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Asked: 2022-04-12T19:49:16+00:00 In:

Which of the following are consistent with the efficient markets hypothesis?

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Which of the following are consistent with the efficient markets hypothesis? Check all that apply.

  • A. Changes in stock prices can be accurately predicted by investors.
  • B. The stock market is informationally efficient.
  • C. Changes in stock prices are impossible to predict.

♦ Relevant knowledge
Efficient Market Hypothesis (EMH) is a concept in financial economics that claims that the value of financial assets reflects the totality of information available. The information is explained as an ineffective, weak, semi-strong, and a strong type of efficiency. A weak type of efficiency is one that focuses on any information from the past regarding values of the financial asset like trading volume. Semi-strong is a reference to information accessible to the general public. This is information on firms’ making money, divisions and products. It is simply the sum of all data in the accounting records of a company. An efficient method of operation comprises all this information as well as information from industry.

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    Expert

    The correct answer is B. The stock market is informationally efficient. and C. Changes in stock prices are impossible to predict.

    Because: The efficient market hypothesis assumes that asset prices reflect all information available and are impossible to beat.

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    • Information is efficient in the stock market.
    • Stock prices can change without warning.

    Explanation – The efficient market hypothesis assumes that asset prices reflect all information available and are impossible to beat.

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