--%>
Assignment Help - homework help

Market hypotheses

Efficient market hypotheses:

a) Weak-form efficient market hypothesis: It assumes that current stock prices reflect all security market information including the historical sequence of prices, rates of return, trading volume data and other market generated information. This hypothesis implies that past rates  of return and other historical market data have no relationship with the future rates of return. For investment purpose, this means that one would not be able to gain by using any trading rule that decides whether to buy or sell a security based on past rates of return or any other security market data.

b) Semistrong-form efficient market hypothesis: It asserts that security prices rapidly adjust to the release of all information i.e. current security prices reflect all public information. This hypothesis encompasses the weak form hypothesis because all the market information considered by the weak form hypothesis such as stock prices, rates of return and trading volume is public. Public information also includes all non-market information like earnings and dividend announcements, price to earnings ratio, stock splits, economic and political news. From the investment point of view, the investors who base their decisions on any important new information after it is public should not derive above average risk adjusted profits from their transactions.

c) Strong-form efficient market hypothesis: This contends that stock prices fully reflect all information from public and private sources. This means that no group of investors has monopolistic access to information relevant to the formation of prices. From investment point of view, no group of investors should be able to consistently derive above average risk adjusted rates of return.

   Related Questions in Microeconomics

  • Q : Define Inferior good Inferior good : It

    Inferior good: It is a good for which, other things equivalent, a rise in income leads to a reduction in demand.

    		•
  • Q : Define money Money : Money is what

    Money: Money is what money does. Or Money is something that is accepted as a medium of exchange and at similar time act as a store of value.

    		•
  • Q : Minor Inefficiencies in Monopolistic

    Minor inefficiencies generated since monopolistic competitors differentiate their products may be more than offset through the: (w) increase in economic equity. (x) expansion of the psychologically-meaningful choices obtainable to consumers. (y) reduc

    		•
  • Q : Problem on Explicit Costs Can someone

    Can someone help me in finding out the precise answer from the given options. The explicit costs of the firm would not comprise: (1) Salaries paid to the employees. (2) The value of owner’s effort and time. (3) Electric bills automatically paid as the drafts on

    		•
  • Q : Illustration of teleporter market in

    The teleporter market would show a surplus when: (1) teleporter buttons were priced at P3. (2) Q2 teleporter buttons were produced and sold at a price of P2. (3) teleporter buttons were priced at P2. (4) Q

    		•
  • Q : Words of Henry George about Economic

    Henry George believed that: (1) landowners deserve the economic rent that their land holdings provide. (2) a single tax on land equal to the unearned surplus would pay for all needed government. (3) economic inefficiency would result from a tax on the

    		•
  • Q : Negative marginal utility The economic

    The economic good becomes an economic bad whenever consumption is expanded into an area where: (1) Sellers experience the moral hazard.  (2) Marginal returns are diminishing. (3) Marginal utility is negative. (4) Buyers suffer from adverse choice. (5) Extreme cho

    		•
  • Q : Income Distribution in Development

    Income distribution tends to turn into more equal, statistically, while a country: (i) adopts central planning. (ii) becomes more developed and prosperous. (iii) relies more heavily on agriculture. (iv) reduces corporate tax rates. (v) adopts laissez-

    		•
  • Q : Reduction of consumption of Inferior

    Brian, a poor college student, eats pinto beans or Ramen Noodles for dinner every night. After the graduation, he takes a job with a beginning salary of $50,000 per year. This modification in income is most probable to: (1) Decrease his consumption of both the product

    		•
  • Q : Output of profit-maximizing monopolist

    Hybrid Roses is the merely florist in 60 miles of Presidio, Texas. When total fixed costs (for example, rent and utilities) are $9 per hour, such profit-maximizing monopolist will generate an output of: (1) two dozen roses per hour. (

    		•