Which of the following is TRUE about the strong form of market efficiency? Insider information cannot help investors to outperform the market This form of efficiency suggests that all public information is already reflected in current prices Fundamental analysis can be used to identify mispriced securities Technical analysis can be used to identify mispriced securities

Market Efficiency Hypothesis (MEH) is an assumption which states that prices of the securities/stock…

Answered: Which of the following is TRUE about…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 3MCQ

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Which of the following is TRUE about the strong form of market efficiency?

		Insider information cannot help investors to outperform the market
		This form of efficiency suggests that all public information is already reflected in current prices
		Fundamental analysis can be used to identify mispriced securities
		Technical analysis can be used to identify mispriced securities

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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