Question

A market where prices reflect all available public information is _____.

Answer 1

Answer:

The correct answer is:

b.) semistrong form efficient

Explanation:

In financial economics, the efficient-market hypothesis is a hypothesis that states that asset prices reflect all available information. The concept theorizes that the market is generally efficient, because it holds that a market cannot be beaten, because it incorporates all the important determination information into current share prices.

There are three versions of an efficient market hypothesis:

1. strong form efficient: This version states that all information - both information available to the public, and those not publicly known - is completely accounted for in stock prices, and there is no information type that can give an investor an advantage in the stock market.

2. semi-strong efficient: This version believes that only information readily available to the public can be used to factor prices and that changes in prices to new equilibrium levels are a product of this public information.

3. weak form efficient: This version assumes that current stock prices reflect all security market information. It contends that past price and volume data have no relationship to the direction or level of security prices. It concludes that excess returns cannot be achieved using technical analysis.