According to economists: A. investor expectations are never rational. B. market crashes and bubbles suggest that unexploited profit opportunities may exist and that the efficient market hypothesis might be fundamentally flawed. C. fundamental changes in the economy can easily explain the Black Monday and tech crashes. D. even though stock market prices may not always solely reflect market fundamentals, as long as market crashes are predictable, the basic lessons of efficient markets theory hold. Which is the correct answer?
Market crashes and bubbles suggest that unexploited profit opportunities may exist and that the efficient market hypothesis may be fundamentally flawed.
( Black Monday crash of 1987 and the Tech crash of 2000 made Economists all over the world question the validity of efficient market hypothesis.Efficient market Couldn't have produced such massive swings in stock prices.some economists have even come up with theories they call rational bubbles to explain market crashes. In a rational bubble, asset prices can deviate from their fundamental value for a long time because the bursting of the bubble can't be predicted. So there are unexploited profit opportunities.
According to economists: A. investor expectations are never rational. B. market crashes and bubbles suggest that...