Which of the following is/are true?
I. Proponents of efficient markets believe that new information is impounded correctly and gradually in stock prices.
II. Technical analysts believe that new information spreads through the market rapidly and gets reflected in the prices, thus moving the markets.
III. Fundamental analysts believe that stock prices are determined by supply and demand in the security markets.
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A. B. C. D.C
Technicians believe that new information seeps into prices only gradually whereas efficient market theorists believe that this adjustment is extremely rapid; too rapid to allow consistent and systematic exploitation of particular kinds of information like dividend changes.
As in any other market, prices in security markets are determined by supply and demand; this is not in dispute between technicians and non-technicians. What is in dispute is the source and nature of demand for securities; technicians believe that demand adjusts slowly to new information while non-technicians consider the process to be almost instantaneous.