2. Efficient Markets (a) Efficient Markets and Price Dynamics Which of the following statements are true if the efficient markets hypothesis holds: i. Future events can be forecast with perfect accuracy. ii. Prices reflect all available information. iii. Security prices change for no discernible reason. iv. Prices do not fluctuate. (b) The Random Walk model A stock price follows a random walk when i. Stock price changes are random but predictable. ii. Stock prices respond slowly to both new and old information. iii. Future price changes are uncorrelated with past price changes. iv. Past information is useful in predicting future price changes