Ask the Tutor ACCA FM
Good evening,
I was having a little trouble getting around this question:
The existence of information content in dividends contradicts the idea that the stock market is strong-form efficient.
The existence of projects with positive expected net present values contradicts the idea that the stock market is strong-form efficient.
Answer to 1 is True and 2 is False.
I didn't quite understand this question. Could you help me with question please?
Thank you.
18d ago#1Strong-form market efficiency means all information—public and private (inside information)—is fully reflected in a stock's price. This means no one can consistently beat the market using any information source, including inside information.
The first statement is True because information content in dividends means past prices and public data do not reveal all information, while the second statement is False because positive net present value projects can exist and still fit within an efficient market.
