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    Efficient Market Hypothesis-strong, semistrong, weak

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    Which is true and why?

    Which of the following is correct?

    a) The Efficient Market Hypothesis suggests that the market does not price stocks fairly; hence, managers should make decisions based on the premise that a firm's stocks are undervalued or overvalued.
    b) An individual who has information about past stock prices would be able to profit from this information if weak-form market efficiency exists.
    c) An individual who has inside information about a publicly traded company should be able to profit from this information if strong-form market efficiency exists.
    d) For the Efficient Market Hypothesis to hold true, every individual investor must be "rational"
    e) Semistrong-form market efficiency means that stock prices reflect all public, but not necessarily all private information.

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    Which of the following is correct?

    a) The Efficient Market Hypothesis suggests that the market does not price stocks fairly; hence, managers should make decisions based on the premise that a firm's stocks are undervalued or overvalued.
    b) An individual who has information about past stock prices would be able to profit from this information if weak-form market efficiency exists.
    c) An individual who has inside information about a publicly traded company should be able to profit from this information if strong-form market efficiency exists.
    d) For the Efficient Market Hypothesis to hold true, every individual investor must be "rational"
    e) Semi-strong-form market efficiency means that stock prices reflect all public, but not necessarily all private information.

    Answer: e) Semi-strong-form market efficiency means that stock prices reflect all public, but not necessarily all private ...

    Solution Summary

    Answer to a multiple choice question on Efficient Market Hypothesis.

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