Question

Joe bought a stock at $57 per share. the price promptly fell to $55. joe held on to the stock until it again reached $57, and then he sold it once he had eliminated his loss. if other investors do the same to establish a trading pattern, this would contradict _______.

Answer 1

When buyers purchase stock at a certain price, and it falls, and then rises back up to its original purchased price, this is called the weak- form EMH. The weak form EMH states that market and securities are random in nature and are not influenced by past events in stock levels.