Question

Which of the following statement(s) is/are false? I. In an efficient market (strong form efficiency), fundamental analysis still provides value to an investor II. Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generaly cannot make a reasonable profit. III. Retail investors prefer weak form efficiency over strong form efficiency I only O ll only Ill only O 1 & Ill only O None of the above answers

Answer 1

The correct answer is I and III are false In a strong form efficient market neither fundamental nor technical analyst can provide value to an investor. Strong form efficiency says that both public and private information are implicit in the price. It is true, based on semi strong form of the efficient market, the investor can not make a profit since that information would be included in the price. Retail investor generally prefers strong form efficiency because they do not have access to that much information as much as others have and in strong form efficiency they would not be at disadvantage.