1 answer

Explain the 3 forms of the efficient markets hypothesis (EMH) and briefly discuss the evidence supporting...

Question:

Explain the 3 forms of the efficient markets hypothesis (EMH) and briefly discuss the evidence supporting each. (12 pts)
Explain the 3 forms of the efficient markets hypothesis (EMH) and briefly discuss the evidence supporting each. (12 pts)

Answers

Efficient market hypothesis:

security prices already reflect all the available information.

They are 3 levels of Market efficiency:
1. Strong efficiency: Insider information, fundamental analysis and technical analysis are unless in such a market.
2. Semi- Strong: fundamental analysis and technical analysis are unless in such a market.
3. Weak: technical analysis is unless in such a market.  

In practical life: it's very difficult to obtain strong efficiency markets.

Currently, markets are not 100% efficient ( strong efficiency markets).

Most of the markets currently lie between Weak and Semi- Strong.

We can only benefit from Insider Information in Semi- Strong efficiency markets.

.

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