Answered: Which is NOT true about the weak,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which is NOT true about the weak, semi-strong, and strong forms of the efficient markets?

Under the weak form, only historical information is reflected in asset prices.

Under the semi-strong form, both past and currently known information is reflected in prices.

Under the strong form, all information, past and present, publicly known and private, is reflected in prices.

Under all forms, price levels are quickly impacted by new information.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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