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John Moffat.
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- August 25, 2018 at 7:59 pm #469417
Dear sir I’m having a bit of problem with this bpp mock exam mcq:
Shares prices quoted on astock exchange are observed to reflect historical share price information and other historical information about a company, but also responds immediately to other information about the company when it becomes publicly available. In recent years share prices have been unpredictable and volatile.
which market efficiency is this:
1)weak form
2) semi strong
3)strong
4)not efficientMy answer: I ticked weak form, because its the historical information being reflected in prices.
Their answer: semi strong form.
their explanation:new information that effects share prices may arrive in an unpredicatble way(random walk theory) so share prices dont follow a set pattern and may move in an unpredictable and volatile manner.my problem: Isn’t random walk theory a characteristic of weak form efficiency? Why are they calling it semi strong form?
Thankyou
August 26, 2018 at 7:07 am #469457The answer is semi-strong (because the share price responds to information when it becomes publicly available). I am not sure why they have explained the answer in the way they have – it doesn’t make much sense 🙂
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