13. In an efficient market the correlation coefficient between stock returns for two non-overlapping time periods should be a. positive and large. b. positive and small. c. zero. d. negative and small. e. negative and large.

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19 November, 15:59

13. In an efficient market the correlation coefficient between stock returns for two non-overlapping time periods should be a. positive and large. b. positive and small. c. zero. d. negative and small. e. negative and large.

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Camren Allen · Answer 1

Answer:Option C

Explanation:

According to the Efficient market Hypothesis (EMH) the prices of the product reflect the information. Based on this data the investors plan to invest in the passive investment strategy.

In the efficient market the security prices have quick effects to the new data. The stock share price has random walk in efficient period. The correlation coefficients has to be Zero, or else the returns from one period is used to predict returns of future periods and make abnormal profits.