Asked by Özge SA?IR on Apr 24, 2024
Verified
The strong form of the EMH states that ________ must be reflected in the current stock price.
A) all security price and volume data
B) all publicly available information
C) all information, including inside information
D) all costless information
Strong Form
In market efficiency theory, the strong form suggests that all information, both public and private, is reflected in stock prices.
Inside Information
Insider information refers to material information about a company that has not been made public and that could influence an investor's decision to buy or sell the stock.
- Absorb the fundamentals of market efficiency and its distinctions (weak, semistrong, strong).
- Gain insight into how stock prices are affected by public and private information according to the principles of the Efficient Market Hypothesis.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
C
Explanation :
The strong form of the EMH states that all information, including inside information, must be reflected in the current stock price. This means that even privileged information cannot be used to achieve higher returns than the market average, as it is already incorporated into the price. Therefore, choice C is the best option as it reflects the definition of the strong form of the EMH. Choices A, B, and D represent less stringent levels of the EMH.
Learning Objectives
- Absorb the fundamentals of market efficiency and its distinctions (weak, semistrong, strong).
- Gain insight into how stock prices are affected by public and private information according to the principles of the Efficient Market Hypothesis.