Author Question: Describe the three forms of market efficiency. What will be an ideal ... (Read 66 times)

folubunmi · **on:** Jul 10, 2018

Describe the three forms of market efficiency.

What will be an ideal response?

Question 2

Carrying inventory reduces the costs associated with periodic bad debt losses.

Indicate whether the statement is true or false

Jadwiga9 · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: WEAK-FORM MARKET EFFICIENCY: In weak-form efficient markets, current prices reflect the price history and trading volume of the stock. It is of no use to chart historical stock prices to predict future stock prices such that you can identify mispriced stocks and routinely outperform the market.
SEMI-STRONG-FORM MARKET EFFICIENCY: In semi-strong-form efficient markets, current prices already reflect the price history and volume of the stock, as well as all available public information. It is therefore of no use to try to exploit publicly available news or financial statement information to routinely outperform the market.
STRONG-FORM MARKET EFFICIENCY: In strong-form efficient markets, current prices reflect the price and volume history of the stock, all publicly available information, and all private information. All information is already embedded in the price, and there is no advantage even to insiders who might wish to exploit their private information.

Answer to Question 2

FALSE