Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 2: Question 8-1CP (page 261)

The semi-strong form of the efficient market hypothesis asserts that stock prices:

a. Fully reflect all historical price information.

b. Fully reflect all publicly available information.

c. Fully reflect all relevant information including insider information.

d. May be predictable.

Short Answer

Expert verified

The correct answer is ‘b’.

Step by step solution

01

Definition

The semi-strong form of the efficient market hypothesis suggests that the movement in the price of security is a reflection of publicly available information.

02

Explanation

Based on the definition above it is evident that the publicly available information makes it a semi-strong form of efficient market hypothesis.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Suppose you’ve estimated that the fifth-percentile value at risk of a portfolio is -30%. Now you wish to estimate the portfolio’s first-percentile VaR (the value below which lie 1% of the returns). Will the 1% VaR be greater or less than -30%?

XYZ stock price and dividend history are as follows:

Year Beginning-of-Year Price Dividend Paid at Year-End

2010 \(100 \)4

2011 \(110 \)4

2012 \( 90 \)4

2013 \( 95 \)4

An investor buys three shares of XYZ at the beginning of 2010, buys another two shares at the beginning of 2011, sells one share at the beginning of 2012, and sells all four remaining shares at the beginning of 2013.

a. What are the arithmetic and geometric average time-weighted rates of return for the investor?

b. What is the dollar-weighted rate of return?

(Hint: Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2010, to January 1, 2013. If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.).

a. Briefly explain the concept of the efficient market hypothesis (EMH) and each of its three forms—weak, semi-strong, and strong—and briefly discuss the degree to which existing empirical evidence supports each of the three forms of the EMH.

b. Briefly discuss the implications of the efficient market hypothesis for investment policy as it applies to:

i. Technical analysis in the form of charting.

ii. Fundamental analysis.

c. Briefly explain the roles or responsibilities of portfolio managers in an efficient market environment.

Are the following true or false? Explain.

a. Stocks with a beta of zero offer an expected rate of return of zero.

b. The CAPM implies that investors require a higher return to hold highly volatile securities.

c. You can construct a portfolio with beta of .75 by investing .75 of the investment budget in T-bills and the remainder in the market portfolio.

What is the expected rate of return for a stock that has a beta of 1 if the expected return on the market is 15%?

a. 15%.

b. More than 15%.

c. Cannot be determined without the risk-free rate.
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Managerial Economics

Read Explanation

Organizational Communication

Read Explanation

Intermediate Accounting

Read Explanation

Operational Management

Read Explanation

Business Operations

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free