Question

If markets are semi-strong form efficient, do value stocks affirm or contradict the CAPM? Be specific about the relationship between the theory’s predictions and what we observe in the historical data. Hint: think about the betas.

Answer 1

The semi-strong form efficiency theory follows the belief that because all information that is public is used in the calculation of a stock's current price, investors cannot utilize either technical or fundamental analysis to gain higher returns in the market.

Those who subscribe to this version of the theory believe that only information that is not readily available to the public can help investors boost their returns to a performance level above that of the general market.

Hence if markets are semi-strong form efficient,Value of stock contratict the CAPM.