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Market Efficiency

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Market Efficiency

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by AvatarJohn Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 25, 2018 at 7:59 pm #469417
    Avatarayeshatabani
    Member
    • Topics: 98
    • Replies: 95
    • ☆☆

    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 efficient

    My 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 #469457
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54846
    • ☆☆☆☆☆

    The 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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  • The topic ‘Market Efficiency’ is closed to new replies.

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