Question

Assume that markets are weak-form efficient, but not semi-strong form or strong form efficient. Which of the following statements is most correct?

a. Each common stock has an expected return equal to that of the overall market.

b. Bonds and stocks have the same expected return.

c. Investors can expect to earn super-normal returns if they have access to public information.

d. Investors may be able to earn super-normal returns if they have access to information that has not been publicly revealed.

e. Statements c and d are correct.

Answer 1

In a week form Efficient market, only the historical events have been reflected in to the current price and current price will not be having any kind of impact over the future price

So it can be said that those who are having an access to privately available information will be having the most chance of making money in weak form efficient because that information have not been discounted but other publicly available information does not offer with the same choice because they can mean that they have been discounted to certain extent so privately available information will be providing an edge over other investment opportunities.

Correct answer will be option (d) investor may be able to earn supernormal return if they have access to information that has not been publicly