The efficient markets hypothesis is weakened by evidence that
A) stock prices tend to follow a random walk.
B) stock prices are more volatile than fluctuations in their fundamental values can explain.
C) technical analysis does not outperform the overall market.
D) an investment adviser's past success or failure at picking stocks does not predict his or her future performance.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis (EMH) posits that all available information is already reflected in stock prices, making it impossible to consistently achieve higher returns than the overall market through stock selection or market timing. Evidence that stock prices are more volatile than can be explained by fluctuations in their fundamental values challenges the EMH, suggesting that prices can deviate from their true value, which contradicts the hypothesis.

The Efficient Markets Hypothesis Is Weakened by Evidence That