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Chapter 7: The Stock Market, the Theory...
Synopsis
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Chapter 7 discusses theories that explain changes in the stock market. First, fundamental theories of stock valuation are developed. Second, the theory of rational expectations is introduced, along with the implications of this theory as applied to financial markets, where it is known as the efficient market hypothesis. Recently, expectations theory has received great attention as economists have searched for more adequate explanations of the observed behavior of economic variables such as unemployment, interest rates, and asset prices.
For a more detailed chapter review with additional exercises and self-tests, order the Student Study Guide, ISBN 0-321-19416-0.
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