Concept explainers
To discuss: “The market is weak form efficient if it is semi-strong form efficient”.
Introduction:
Semi-strong form efficient market exists if the stock prices reflect the public information in the form of financial statements. This type is controversial because it suggests that finding the best stock investment based on financial information is useless. It is because the stock price in the market already reflects the impact of financial information.
A weak form efficient market exists if the stock prices at present reflect the trend in the stock’s historical prices. This market suggests that finding the best stock investment based on historical information is useless because the stock price in the market already reflects the information.
Want to see the full answer?
Check out a sample textbook solutionChapter 10 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
- The hypothesis that market prices reflect all publicly-available information is called efficiency in the: Strong form. Semi-strong form. Weak form.arrow_forwardDefine strong form of market efficiencyarrow_forwardWhat is the role that the required rate of return plays in the NPV model? In the IRR model?arrow_forward
- Compare and contrast the concepts and investment implications of efficient market hypothesis(EMH), inefficient markets, and efficiently inefficient markets.arrow_forwardWhy is partitioning an internal rate of return important?arrow_forwardDefine weak form tests of market efficiency and their main objective. Describe in detail the three main weak form tests of market efficiency.arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning