CH 8: The Efficient market Hypothesis Flashcards
1
Q
What is the efficient market hypothesis?
A
Are markets in which security prices reflect currently available information and adjust quickly as information becomes available. Securities are normally in equilibrium and are fairly priced.
2
Q
What does random walk mean when talking about stock prices?
A
is means that price changes should be random and unpredictable, as random information come into the market.
3
Q
What does it mean if a market is efficient?
A
It means that all available information is already reflected in the price of the security, which makes any information useless with regards to making an abnormal return.
