Stock prices are useful as a leading indicator to explain


Stock prices are useful as a leading indicator. To explain this phenomenon, which of the following is most accurate? Stock prices:

  1. Predict future interest rates and reflect the trends in other indicators.
  2. Do not predict future interest rates, nor are they correlated with other leading indica- tors; the usefulness of stock prices as a leading indicator is a mystery.
  3. Reflect the trends in other leading indicators only and do not have predictive power of their own.

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Accounting Basics: Stock prices are useful as a leading indicator to explain
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