If asset markets are driven by the "animal spirits" of investors,then
A)those markets reflect rational behavior.
B)those markets reflect irrational behavior.
C)the efficient markets hypothesis is correct.
D)the stock market exhibits informational efficiency.

Question

Quizplus · Accepted Answer

Animal spirits refer to emotions and instincts that drive investor behavior, often resulting in herd mentality and irrational exuberance or panic. Thus, asset markets driven by animal spirits reflect irrational behavior. The efficient markets hypothesis assumes rational behavior and information efficiency, which may not hold in the presence of animal spirits. The informational efficiency of the stock market is also not necessarily guaranteed when emotions influence investor decisions.

If Asset Markets Are Driven by the "Animal Spirits" of Investors,then