If the market adheres to the strong form of the efficient market hypothesis, what is the implication for the usefulness of gathering and analysing data about companies? What sort of logical paradox seems to result?
Question 10
A. If the market adheres to the strong form of the
B. 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.
C. Tests of market efficiency are often referred to as “joint tests” of two hypotheses. Explain the meaning of this. Further, try to speculate on the difficulty this poses for tests of market efficiency.
D. For each of the following given information, indicate which form of the efficient market hypothesis is correct and if that information is reflected in securities prices.
(i). Government-released data on the money supply
(ii). A corporate quarterly earnings report
(iii). A public release of information from the Securities and Exchange commission on insider trading
(iv). Confidential discussions of a corporate board of directors on dividend policy.
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