To select : A correct option if the efficient market hypothesis holds good Introduction : EMH or Efficient Market Hypothesis defines that stock prices reflect all the relevant information available in the market thereby reflecting a fair market value. No one can predict stock market accurately as it follows a random walk.

Question

Want to see the full answer?

Answer 1

Question

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.

Chapter 11, Problem 12PS

Summary Introduction

To select:

A correct option if the efficient market hypothesis holds good

Introduction:

EMH or Efficient Market Hypothesis defines that stock prices reflect all the relevant information available in the market thereby reflecting a fair market value. No one can predict stock market accurately as it follows a random walk.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

If the weakest form of market efficiency holds, then security prices reflect all information found in past prices and volume. Thus, traditional "technical analysis" will not work. Group of answer choices True False

Which of the following is true according to the pure expectations theory? Forward rates:a. Exclusively represent expected future short rates.b. Are biased estimates of market expectations.c. Always overestimate future short rates.

Which of the following is not a characteristic of an efficient market? Investors can frequently make profits by predicting asset market prices that are different from intrinsic values. The market value of all securities at any one instant in time fully reflect all available information. Investors act rationally. The forces of demand and supply work to maintain that the security's market price and its intrinsic value are in equilibrium.

Answer 2

Question

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.

Chapter 11, Problem 12PS

Summary Introduction

To select:

A correct option if the efficient market hypothesis holds good

Introduction:

EMH or Efficient Market Hypothesis defines that stock prices reflect all the relevant information available in the market thereby reflecting a fair market value. No one can predict stock market accurately as it follows a random walk.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

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.

Chapter 11, Problem 12PS

Summary Introduction

To select:

A correct option if the efficient market hypothesis holds good

Introduction:

EMH or Efficient Market Hypothesis defines that stock prices reflect all the relevant information available in the market thereby reflecting a fair market value. No one can predict stock market accurately as it follows a random walk.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

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.

Chapter 11, Problem 12PS

Summary Introduction