Question

You have discovered that for a certain group of stocks, large positive price changes are always followed by large negative price changes. This finding is a violation of the ________ form of the efficient market hypothesis.

Answer 1

Answer:

Strong form

Explanation:

Efficient market hypothesis states that all information about a set of investment in a market is readily available, so it is impossible to beat the market and make unusual profit.

There are different forms that looks at the availability of public and non public information in the market system and their effect on stock prices.

The strong form of the efficient market hypothesis states that both public and non public information is accounted for in the price of a stock, therefore there is no way an investor can make unusual profit.

If a certain group of stocks have large positive price changes followed by large negative price changes, it is a violation of strong form of the efficient market hypothesis.