Chapter 4 - Efficient Market

What is the definition of Efficient Market Hypothesis? (EMH)

• financial markets are informationally not efficient and should therefore move predictably

• Defined as some securities slowly reflect all available relevant information

• Is a theory that financial markets are informationally efficient and should therefore move unpredictably

• Main implication is investors will able consistently earn abnormal profit

Which one is NOT the assumption in Efficient Market?

• Share are always trading at their past value

• Investors analyze information in the same way

• Share price reflect all information instantly

• Investors act rationally

_____ is the strategy of taking advantage of price differences in different markets for the same asset.

• Indexing

• Arbitrage

• Dividend Growth Model

• Passive strategy

Only reflect all available public market information but may not reflect new information that is not yet publicly available.

This statement refer to?

• Capital Weak Form

• Semi-Strong Form

• Strong Form

• Leniant form

Stock Prices adjust rapidly to new release of all new public information.

This statement refers to?

• Capital Weak Form

• Semi-Strong Form

• Strong Form

• Lenient Form

Choose arrangement from the least to the biggest amount of information that each form of EMH includes.

• Semi-Strong Form, Strong form, Weak Form

• Strong Form, Semi-Strong, Weak Form

• Weak Form, Strong Form, Semi-Strong Form

• Weak Form, Semi-Strong, Strong Form