Question $13$

$6\mathrm{.}88$ pts

The idea that current security prices $($i$.$e$.$ common stocks$)$ will reflect all available information $($including optimal forecasts about valuation fundamentals$)$ is described in the textbook as the Efficient Market Hypothesis $("$EMH$").$ This is considered to be true theoretically because in an efficient market all unexploited profit opportunities are quickly eliminated. The instructor said one implication of this is: $q,$

a company's stock price will not always change even when previously unknown and unanticipated significant new information about a company's financial performance is disclosed.

only professional investors can be assured of paying fair prices when buying stocks.

the EMH has been able to explain all major stock market movements for the past $37+$ years.

the only thing that should lead to a change in a stock's price would be significant new information about a company's valuation fundamentals $($i$.$e$.,$ Free Cash Flow, risk profile, growth$).$