Discuss whether the following statement is true or false:
A certain retailing firm has a strong seasonal pattern to its sales.Therefore,we would expect to find a seasonal pattern to its stock price as well.

Question

Quizplus · Accepted Answer

In an efficient market we should not observe a seasonal pattern in stock prices.If investors observe high returns in a particular month they will start purchasing the stock just before the month when sales are expected to rise to take advantage of the extra return.This adjustment of the pattern of investor purchases should cause the pattern to disappear.Hence,the stock prices of the firm will not follow the same pattern as sales in an efficient market.

Discuss Whether the Following Statement Is True or False