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Gemiola [76]
3 years ago
5

Dan is a chemist for ABC, a major drug manufacturer. Dan cannot earn excess profits on ABC stock based on the knowledge he has r

elated to his experiments if the financial markets are:_________________.
1. strong form efficient.
2. semistrong form efficient.
3. weak form efficient.
4. aware that the trader is an insider.
5. efficient at any level.
Business
2 answers:
Viefleur [7K]3 years ago
6 0

Answer:

1) strong form efficient.

Explanation:

The efficient market hypothesis states that all the relevant information regarding stocks traded in a market is already included in the price of the stocks.

This investment theory argues that if all the relevant information was public, then even if a person had insider information, it would be useless since everyone should have access to the same information. Of course this model is only theoretical, since in real life information is something very valuable and not everyone has access to it.

Readme [11.4K]3 years ago
5 0

Answer:

2. Semi-Strong Form Efficient

Explanation:

Semi-strong form of market efficiency occurs when all publicly available information is reflected on security prices such that, earning additional return is not a possibility.

Here, Dan can not earn excess profits on ABC stocks because, if the financial market is semi strong form efficient, his experience on technical and fundamental analysis, which is based on how profit is generated and current information respectively, can not help to determine the price movement in the future.

Also, based on research, it is suggested that developed market are semi strong efficient, while developing markets are not semi strong efficient.

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For many years China relied on central planning but is currently moving away from a central market to a free market based economy. This would mean that China's economy is in a state of Transition. This statement is not necessarily True.

Explanation:

Free market is a market structure in which there is a little or no control of the government on supply and demands of the products or services. The structure of this market depends upon the political or legal rules.

If China moved from the central to the free market, it does not mean that is it in the state of Transition. This is because, it could be the choice of China itself to keep a balance between the command and the free market economies, whatever suit its needs.

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