Question

Describe the weak form efficiency ,semi-strong efficiency and the strong form efficiancy information for AT&T ( NYSE) in the stock market

Answer 1

There are basically three forms of market efficiency

· Weak form of market efficiency states that market price incorporates all the historical information about the security and by analyzing past stock price an investor can not generate excess return from the market. This means that if you look at the chart price of AT &T, it is very difficult that you would be able to generate excess return.

· Semi-strong form of market efficiency states that market prices incorporates all the publicly available information about a security and fundamental analysis of the stock will not help the investor in generating excess return from the market. With reference to AT&T if all the publicly available information is incorporated in the price then it would be very difficult for an investor to generate excess return from AT&T.

· Strong form of efficiency states that people even with insider information can not generate excess return as that information would already have been incorporated in the price. So even if some senior management in AT&T tries to buy the stock to generate excess return, they would not be successful despite having insider information because that would have already been incorporated in the price.