Under the concept of an efficient market, a random walk in stock prices means th
ID: 2717812 • Letter: U
Question
Under the concept of an efficient market, a random walk in stock prices means that:
there is no driving force behind price changes. technical analysts can predict future price movements to earn excess returns.
the unexplained portion of price change in one period is unrelated to the unexplained portion of price change in any other period.
the unexplained portion of price change in one period that cannot be explained by expected return can only be explained by the unexplained portion of price change in a prior period.
None of these.
Explanation / Answer
Answer: the unexplained portion of price change in one period is unrelated to the unexplained portion of price change in any other period.
Under the concept of an efficient market, a random walk in stock prices means that: the unexplained portion of price change in one period is unrelated to the unexplained portion of price change in any other period.
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