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Chapter 7: Q.8 (page 210)

“If stock prices did not follow a random walk, there would be unexploited profit opportunities in the market.” Is this statement true, false, or uncertain? Explain your answer.

Short Answer

Expert verified

There would be no profit chances in the market if the stock price did not vary. The assertion is incorrect.

Step by step solution

01

Stock market : 

A market where businesses may register and sell long-term debt and securities to the general public.

02

Explanation :

There would be no profit chances in the market if the stock price did not vary. The price would become certain, there would be no danger, and there would be that much return on the securities, as well as market performance. Many individuals hold the company's shares, which is the primary cause for opportunities being exploited. As a result, the assertion is incorrect.

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Most popular questions from this chapter

Visit the Bloomberg Markets website at www.bloomberg .com/markets/stocks. Their interactive graph allows you to see cumulative returns for individual stocks as well as market indices. Over the last five years, which of the three indices appears the most volatile––the S&P 500 (SPX:IND), the Dow Jones Industrial Average (INDU:IND), or the NASDAQ Composite (CCMP:IND)? Which index would have been the best investment if compounded over the last five years?

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