CS Executive · Corporate Accounting and Financial Management · Security Analysis
Under the Efficient Market Hypothesis, a market in which security prices reflect all past price and volume data but not necessarily public financial statements or private information is described as:
This is weak form efficiency. Prices already reflect all past price and volume data, so studying historical patterns cannot yield abnormal returns. Semi-strong and strong forms go further by including public and private information respectively.
- AWeak form efficientCorrect
- BSemi-strong form efficient
- CStrong form efficient
- DPerfectly inefficient
Explanation
Weak form efficiency says current prices already incorporate all historical price and trading volume information. Semi-strong adds all publicly available information, and strong adds private or insider information. Hence a market reflecting only past price data is weak form efficient.
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