Question

You are currently looking for a new stock to invest in. Through a friend, you hear that Evaporite SYstems has just successfully completed testing on a new system to eliminate wastewater which will make all other systems obsolete, and have partnered with a major petroleum development company to bring it to market. Describe under which form(s) of market efficiency it would be worth your time and effort to invest in this company, and under what form(s) of efficiency, it would not be feasible. Why is this the case?

Answer 1

When I am learning about that new system will eliminate the wastewater and it will be having a implication of increase into share price then I will only be investing into the share if I am assured that market is Semi efficient Market and this information is private in nature and all the privately available information have not been discounted to the stock price in semi efficient form of market.

I will also be investing into the stock market is weak form efficient of market because weak form efficient of market will only be discounting the information which are of past nature and they are not a future nature so I will be trying to invest into the stock through weak for Efficient market also which will be having a scope for new information and they will be providing rate of return on new information.

it would not be feasible under strong form efficiency to invest into this stock because a strong form Efficient market will advocate that privately available information and publicly available information have already been discounted into the stock price and there is no scope for making any additional rate of return so I will not be investing into strong form efficient of market because that will not provide me an opportunity to make any excess rate of return.