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Single choice3)The three different forms of market efficiency are:Past form, peak form and future formWeak form, semi-strong form, and strong formEntry form, maintain form and exit form

Question

Single choice3)The three different forms of market efficiency are:Past form, peak form and future formWeak form, semi-strong form, and strong formEntry form, maintain form and exit form

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Solution

The correct answer is: Weak form, semi-strong form, and strong form. These are the three forms of market efficiency according to the Efficient Market Hypothesis.

  1. Weak form efficiency suggests that all past prices of a stock are reflected in today's stock price. Therefore, technical analysis cannot be used to predict and beat the market.

  2. Semi-strong form efficiency suggests that all publicly available information is reflected in a stock's price. Therefore, neither fundamental nor technical analysis can be used to achieve superior gains.

  3. Strong form efficiency suggests that all information, public and private, is accounted for in a stock's price. Neither insider information nor fundamental or technical analysis can be used to achieve superior gains.

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Similar Questions

What are the various forms of market efficiency? State their implications

The most relevant form of market efficiency to financial reporting is:  Reading required:            Learning objective 2.5.2 on page 63-64.Group of answer choicesthe weak form.the strong form.None of the options is correct.the semi-strong form.

Which of the following statements about the strong form of market efficiency is not correct? Reading required:            Learning objective 2.5.2 on page 63-64.Group of answer choicesCapital markets are not considered to be efficient in the strong form.Investors are able to participate in 'insider trading'.Security prices fully reflect all information, including that which is not publicly available.Investors are unable to earn abnormal returns through private information.

Semi-strong form efficiency is a stronger form of efficiency than weak form efficiency since price histories are also public information.

What Is Market Efficiency?

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