There are stock market trading opportunities exist in four different market conditions:- The market is not weak form efficient. The market is weak form but not semi-strong form efficient. The market is semi-strong form but not strong form efficient. The market is strong form efficient. i) Assume the stock price has risen steadily each day for the past 30 days. Discuss the possible outcome according to above each market conditions. ii) “The financial statements of a company were released 3 days ago, and you’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques. The companies’ true liquidity strength is understated”. Discuss, how the information on this statement could be affecting the above each market conditions. iii) You observe that the senior managers of a company have been buying a lot of the company’s stock on the open market over the past week. This is due to the insider information. Discuss how insider information can influence profit making in the above each market condition

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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There are stock market trading opportunities exist in four different market conditions:-

The market is not weak form efficient.
The market is weak form but not semi-strong form efficient.
The market is semi-strong form but not strong form efficient.
The market is strong form efficient.

i) Assume the stock price has risen steadily each day for the past 30 days. Discuss the possible outcome according to above each market conditions.

ii) “The financial statements of a company were released 3 days ago, and you’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques. The companies’ true liquidity strength is understated”. Discuss, how the information on this statement could be affecting the above each market conditions.

iii) You observe that the senior managers of a company have been buying a lot of the company’s stock on the open market over the past week. This is due to the insider information. Discuss how insider information can influence profit making in the above each market conditions.

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