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    Question

    The 'Semi-Strong Form' of the Efficient Market

    Hypothesis (EMH) states that stock prices reflect:
    A Only historical price information. Correct Answer Incorrect Answer
    B All publicly available information. Correct Answer Incorrect Answer
    C All information, including insider information. Correct Answer Incorrect Answer
    D Only information from technical analysis. Correct Answer Incorrect Answer
    E Only information from fundamental analysis. Correct Answer Incorrect Answer

    Solution

    • The EMH has three forms, distinguished by what information is reflected in prices:
      1. Weak Form:  Prices reflect  all historical market data  (past prices, volumes). Technical analysis cannot consistently yield profits.
      2. Semi-Strong Form:  Prices reflect  all publicly available information . This includes historical data, financial statements, news, announcements, etc. Neither technical nor fundamental analysis can yield consistent excess returns.
      3. Strong Form:  Prices reflect  all information, public and private (insider) . Even insider information cannot yield consistent profits. This is considered an extreme form.

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