If you believe that stock prices follow a random walk,then probably you
A)do not believe that there is positive relationship between risk and return.
B)do not believe that stock prices reflect all available information.
C)believe in the validity of the efficient markets hypothesis.
D)believe that it is a good idea to engage in fundamental analysis.

Question

Quizplus · Accepted Answer

The belief that stock prices follow a random walk is consistent with the efficient markets hypothesis, which states that stock prices reflect all available information and are therefore unpredictable. This belief also suggests that it is difficult to consistently outperform the market through fundamental analysis or other methods of analysis. Therefore, the best choice is C, which states that the person believes in the validity of the efficient markets hypothesis.

If You Believe That Stock Prices Follow a Random Walk,then