Several writers have helped to popularize the notion that stock prices follow no discernible pattern. What is meant by a random walk, and how can you explain why people continue to invest in stocks if the random walk theory is correct?
The random walk theory holds that stock prices cannot be predicted with any certainty. Although evidence supports the random walk idea, stocks have tended to move to higher values over time. So while the short-term walk may be random, the long-term trend is still up and the return generally higher than other alternatives, such as bonds or savings accounts.
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If the value of the marginal product of physical capital is $30 and the price at which the good the physical capital is used to produce is sold at $15, the marginal product of the physical capital used is:
A) 2 units. B) 5 units. C) 15 units. D) 30 units.
When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment
Fill in the blank(s) with correct word
A previously well-respected and trusted president of a corporation is accused of fraud. At the same time interest rates unexpectedly fall. Which of the above would tend to make the price of the stock rise?
a. the announcement and the fall in interest rates b. the announcement but not the fall in interest rates c. the fall in interest rates, but not the announcement d. neither the announcement nor the fall in interest rates
Consider again the Solow growth model and the following production function: a). If A = 2, L = 20,000, and K = 400, what is output? b). Suppose the labor force grows by 5% so that it is now 21,000. By how much does output increase? c). Starting again with the conditions in part a, what is capital increases by 5%, so that it is now 420. By how much does output increase?