12 Questions
What does market efficiency refer to?
The degree to which prices in financial markets reflect all available information
Which form of market efficiency suggests that current prices fully reflect all past trading information?
Weak Form Efficiency
What is the implication of semi-strong form efficiency on fundamental analysis?
It is not effective in consistently outperforming the market
What is reflected in the current prices in strong form efficiency?
All information, both public and private
What is the consequence of technical analysis in weak form efficiency?
It is not effective in consistently outperforming the market
What does strong form efficiency imply about the ability to consistently outperform the market?
It is not possible to consistently outperform the market with any information
What is a characteristic of arbitrage opportunities in an efficient market?
They are quickly eliminated by market participants.
In an efficient market, which of the following is true about price movements?
Prices move randomly.
What is the implication of active trading in an efficient market?
It is unlikely to be successful over the long term.
What is the result of efficient allocation of resources in an efficient market?
Optimal allocation of resources across the economy.
What is a limitation of the concept of market efficiency?
It fails to account for behavioral biases and market frictions.
What is the role of the concept of market efficiency in financial markets?
It plays a crucial role in understanding and analyzing financial markets.
Test your understanding of market efficiency, its forms, and its implications on investment strategies. Learn about weak form efficiency and its effects on technical analysis.
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