Question

The current literature generally concludes that the share markets in the developed countries are semi-strong form efficient but not strong form efficient. Which of the following statements is consistent with the finding?

Select one:

a. Fundamental analysis will not yield any return as the current share price reflects all publicly available information.

b. Technical analysis is still useful and gives the investor an advantage over others.

c. The current share price reflects both public and private information.

d. Insider trading should be banned to make sure that all investors can trade fairly and not disadvantaged.

Answer 1

If the semi strong form of market hypothesis holds, fundamental and technical analysis will not yield and high return. All public information is reflected in the share price. As the strong form of market hypothesis does not hold, private information can still give an advantage to investors. Hence, the following statement is considered with the findings-

A. Fundamental analysis will not yield any return as the current price reflects all publicly available information.