Answered: Which of the following best describes a…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section4.3: Market Failure

Problem 1YTE

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Which of the following best describes a weak form of market efficiency?

A. it reflects all public and private information
B. the market responds immediately to any new information
C. the market price is based on historical information
D. all of the choices are correct
E. all of the choices are incorrect

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.

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