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According to the efficient-market hypothesis, stock price changes reflect_ , but according to Keynes, stock price changes oft

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Answer #1

2nd option is correct.

Change in underlying economic fundamentals, irrational waves of optimism and pessimism.

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According to the efficient market hypothesis : All Available information is observed by the changes in stock prices and it is reflected in the asset's current Price. So according to this hypothesis there is no new information available in the market and all the information is absorbed in the asset price. If there is a change in the stock price then there is a change in underlying economic fundamental.

According to keynes the changes in the stock prices is due to the people's hypothesis regarding the future expectetions. he assigned these expectations as wave of optimism and wave of pessimism.

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