Is the efficient markets hypothesis (EMH) responsible for the financial crisis of 2007- 2009?
What will be an ideal response?
Hardly. The hypothesis does not claim that the market price is always right. On the contrary, it implies that the prices in the market are mostly wrong, but at any given moment it is not at all easy to say whether they are too high or too low. The fact that the best and brightest on Wall Street made so many mistakes shows how hard it is to beat the market.
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Which of the following would lead to a depreciating dollar?
A. A higher federal deficit B. Lower interest rates C. Higher interest rates D. Contractionary monetary policy
Which investment caused the Reserve Primary Fund to incur heavy losses?
A) mortgage-backed securities B) real estate investment trusts C) commercial paper issued by Bear Stearns D) commercial paper issued by Lehman Brothers
In the open-economy macroeconomic model, the market for loanable funds equates national saving with
a. domestic investment. b. net capital outflow. c. the sum of national consumption and government spending. d. the sum of domestic investment and net capital outflow.
Which of the following is the best example of a network externality?
A. The Internet B. Parks C. Pollution D. Museums