Stock prices fluctuate daily. In relation to the efficient market hypothesis, these fluctuations are: a) inconsistent with the semistrong form of efficiency because prices should be stable. b) consi
Question:
Stock prices fluctuate daily. In relation to the efficient market hypothesis, these fluctuations are:
a) inconsistent with the semistrong form of efficiency because prices should be stable.
b) consistent with the semistrong form because new information arrives daily.
c) consistent with all forms of market efficiency provided the prices do fluctuate on a daily basis.
d) inconsistent with all forms of market efficiency.
e) consistent with the strong form because prices and information are controlled by insiders.
Answers (1)
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Artie April 4, 2023 в 08:23The correct answer is (b) consistent with the semi-strong form because new information arrives daily. According to the efficient market hypothesis, stock prices reflect all available information at any given time. Fluctuations in stock prices occur as new information is processed and incorporated into the stock's price. Therefore, the semi-strong form allows for daily price fluctuations due to the arrival of new information. The strong form, on the other hand, suggests that even insider information is already reflected in the stock price, so fluctuations would not occur under this form of efficiency. The other options are incorrect because they either suggest the market should or should not fluctuate, regardless of new information, and do not align with the semi-strong form of efficiency.
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