A friend of yours trades stocks based on confidential information he overhears at his work. He even told you once that this information is not available to the general public. However, he keeps complaining to you that he can never make any profit on his stock trades. Based on this, you can argue that the stock market is ___ form efficient.

Question

Business

Alec Peck

9 June, 04:37

A friend of yours trades stocks based on confidential information he overhears at his work. He even told you once that this information is not available to the general public. However, he keeps complaining to you that he can never make any profit on his stock trades. Based on this, you can argue that the stock market is ___ form efficient.

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Answers (1)

Know the Answer?

Jair · Answer 1

The correct answer is letter "B": either weak, semi-strong, or strong.

Explanation:

The Efficient Market Hypothesis (EMH) is a theory that states that stocks reflect all the information there is so there is no form investors can beat the market even if having insider information. The EMH establishes then, that technical or fundamental analysis is useless at the moment of "predicting" stock prices.

There are three (3) forms of EMH: weak, semi-strong, and strong. Therefore, if a friend of ours mentions that he cannot beat the market even when having insider information, it implies the market he is trading at is either weak, semi-strong, or strong.