- May 4, 2021 at 11:05 pm #619686AnonymousInactive
- Topics: 44
- Replies: 26
I hope you are good Sir John!
I wanted to ask you about the “Market efficiency hypothesis” few doubts that I wanted to clear!
1) Weak-form market is where the Stock Market reaction is too slow to the corresponding information available or the news announced by the company because all the past price movements are already incorporated in the share price of the company. But it is still possible for shareholders to gain profits by obtaining public information about the company (Is that correct that investors have to suppose that in future share prices will going to increase – which could not be true!)
[Stock Market is weak-efficient because the share prices are only adjusted after once the company has made public announcement]
2) Semi-Strong form market is where the Stock Market reaction occurs from the public information which is announced by the company & within few minutes or so the share prices are adjusted to the public information available in the market? But it is still possible for shareholders to gain profits by obtaining private information about the company?
[Stock Market is semi-efficient because the share prices are only adjusted after once the company has made public announcement]
3) Strong-form market is where the Stock Market reaction appears to occur before the information concerning the new project was made public In other words. strong-form stock market adjusts share prices before any good news is made by the company in public announcement. And it is impossible for any shareholders to gain profits?
[But this reaction of Stock Market changes in the share prices happened due to quite possibly insider trading?]
4) Can you pls tell me what is “not efficient markets at all” and how do we recognize these markets?
[Is it correct these inefficient markets completely ignore to adjust share prices or something else?]May 5, 2021 at 8:33 am #619712John MoffatKeymaster
- Topics: 56
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What you have written is correct except that at the end of (3) you mention insider trading. If all information is available then it is not possible to make profits from insider trading – insider traders can make profits because they have information that other shareholders do not have.
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