Question

Jane believes that she can "beat the market" on a consistent basis by basing her trades on the pattern of prices that now exist. If true, what would Jane's trading pattern violate?

Answer #1

Jane’s trading pattern would violate “**efficient markets**”.

As per the efficient market hypothesis the current prices of shares and stocks reflect all information. Thus makes it impossible to produce risk adjusted excess returns from the trade of a stock either through fundamental analysis or through technical analysis.

As per the efficient market hypothesis stocks always trade at their fair value and hence to beat the market Jane’s trading pattern will violate the efficient markets hypothesis.

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