Question

Explain the implications of stock market efficiency for technical analysis and fundamental analysis.
(150 words)

Answer 1

There are 3 forms of Market Efficiencies

1) Weak form of market efficiencies where all the past information is incorporated in the price. Fundamental analysis can help in earning excess return. Technical analysis cannot be used.

2) Semi Strong Market Efficiencies means prices continuously adjust to the new information in the market. Public information cannot be used to earn an alpha

3) Strong Market Efficiencies means a market not only adjust to public information but also adjust non public information.