“The market is weak form efficient if it is semi-strong form efficient”. Introduction: Efficient market refers to the market where the share prices of companies reflect the existing information. 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.

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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.

Chapter 10, Problem 6CTCR

Summary Introduction

To discuss: “The market is weak form efficient if it is semi-strong form efficient”.

Introduction:

Efficient market refers to the market where the share prices of companies reflect the existing information.

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.

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Students have asked these similar questions

Which of the following is NOT considered a type of market efficiency? a) Weak form efficiency b) Semi-strong form efficiency c) Strong form efficiency d) Ultra-strong form efficiency

If the market is efficient with respect to one information set i.e. either weak, semi-strong or strong form, does this necessarily imply that the market is inefficient with respect to the other two information sets? Explain.

In general, which of the following is NOT considered a type of market efficiency?

Answer 2

Question

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.

Chapter 10, Problem 6CTCR

Summary Introduction

To discuss: “The market is weak form efficient if it is semi-strong form efficient”.

Introduction:

Efficient market refers to the market where the share prices of companies reflect the existing information.

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.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

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.

Chapter 10, Problem 6CTCR

Summary Introduction

To discuss: “The market is weak form efficient if it is semi-strong form efficient”.

Introduction:

Efficient market refers to the market where the share prices of companies reflect the existing information.

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

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.

Chapter 10, Problem 6CTCR

Summary Introduction