Question

There have been many studies over time debating the efficiency of the stock market and just how much information is embedded within the stock price.. In your opinion which form of the efficient market hypothesis do you believe the financial markets behave like?

Answer 1

There are three forms of EMH

1) Weak form: We cannot predict future price based on past price.

2) Semi weak: Any published information cannot be used to predict future price as it has been reflected in the price.

3) Strong form: All forms of information published and unpublished can not be used.

According to me weak and Semi strong form has certain validity as the past prices can be used to predict future prices bu doing technical analysis as there have been people who make profits using it.

Also, Semi strong analysis also holds true because an investor is generally aware of the fundamental and technical aspects and make decision using it.

The third one seems to be incorrect as the unpublished info is not available with the investors and it does not reflect in the price of the stock. Even unpublished info is available with all the investors then only way to earn income would be insider information.