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Question 8B

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Essentials Of Investments
Found in: Page 259
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Short Answer

Which version of the efficient market hypothesis (weak, semi-strong, or strong-form) focuses on the most inclusive set of information?

The correct answer is ‘strong-form’.

See the step by step solution

Step by Step Solution

Definition

According to the EMH or efficient market hypothesis, the stock prices reflect all information therefore they are never undervalued or overvalued. Though the hypothesis is based on the theory that the market is generally efficient, this theory is offered in three different versions i.e. weak, semi-strong and strong-form.

Explanation

Strong-form efficiency includes all the information i.e. historical, public and private. Therefore it offers the most inclusive information.

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