Question

Which of the following are consistent with the efficient markets hypothesis? Check all that apply. You should spend several hours a day studying the business section of your local newspaper to determine which stocks to add to your investment portfolio. Stock markets reflect all available information about the value of stocks. At the market price, the number of people who believe the stock is overvalued exactly equals the number of people who think the stock is undervalued.

Answer 1

The following statements are consistent with the efficient markets hypothesis:

1. Stock markets reflect all available information about the value of stocks.
2. At the market price, the number of people who believe the stock is overvalued exactly equals the number of people who think the stock is undervalued.

Step-by-step explanation:

• The efficient markets hypothesis is such a theory in financial economics which explains that security prices in a liquid market at a given time reflect all available information.
• The upper statements are consistent with this theory only and the statement "You should spend several hours a day studying the business section of your local newspaper to determine which stocks to add to your investment portfolio." is not inconsistent.