Prices are determined by supply and demand. Supply and demand are driven by rational and irrational behavior. Security prices move in trends that persist for long periods of time. The actual shift in supply and demand can be observed in market price behavior. Each of the above statements is assumptions of what type of analysis?
Explanation
Answer: C - Prices are determined by supply and demand. Supply and demand are driven by rational and irrational behavior. Security prices move in trends that persist for long periods of time. The actual shift in supply and demand can be observed in market price behavior. These statements are underlying assumptions of technical analysis. The major challenge of technical analysis is the efficient frontier hypothesis. Efficient markets assume that new information will cause instantaneous price adjustments, pas technical relationships cannot be repeated, technical analysis requires too much subjective interpretation, and decision variables change over time. Technicians believe that the speed with which new information is impounded into prices is slow, whereas fundamentalist believe that prices adjust quickly, and efficient market hypotheses analysts believe it happens almost instantaneously.
