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Foundations Of Financial Management
Found in: Page 471
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

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Short Answer

The efficient market hypothesis is interpreted in a weak form, a semi strong form, and a strong form. How can we differentiate its various forms?

The differentiation of various forms is done on the basis of information associated with the prices.

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Step by Step Solution

Efficient market hypothesis

Efficient market hypothesis is associated with financial economics that indicates that prices of assets depict all the information available.

Differentiation among the versions of efficient market hypothesis

Differentiation among various forms can be done in the following manner:

  • If past price information is not useful for future prices, then it indicates the weak form,
  • If prices reflect all public information, it indicates semi-strong form, and
  • If all the information is reflected in the stock prices, it states the strong form of an efficient market hypothesis.

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