What is the Semi-Strong form of the Efficient Markets Hypothesis (EMH)? Give an example of a...

What is the Semi-Strong form of the Efficient Markets Hypothesis (EMH)? Give an example of a fact or finding that goes against the Semi-Strong EMH.

Expert Solution

Semi Strong that means not a very weak or not a very strong. The Semi-Strong form of the Efficient Markets Hypothesis (EMH) is clearly said that the market is efficient, It can easily reflect all the information that is available in public. In this hypothesis a assumption is taken that a stock is adjusted very quickly in the field of absorbing new information of any field. It also incorporate the weak form hypothesis . In this a assumption is taken that the price of the stock in the market comes after adjusting or reflect of all the information that is available , a investor can not earn profit on the basis of news or newly comes information . Investors can buy the stock when the price or changes may reflect the amount or the information is released.

There are various tests for the semi strong form of the Efficient market hypothesis.

1. Event Test :- A event test can be done to analyse the security prices of both after and before an event , such as earnings . The idea on which the Event test is formed is that a investor will not be able to reap an average return by the helps of trading in an event.

2. Time Series Test :- A time series forecasts returns are totally based on the historical data . In this method a investor can not be earned any abnormal return in any case.

For Example :- The number of fund managers who are outperform the market and that are active fund managers has been not more than can be easily attributed to pure randomness.

There are many cases in which a news comes of failure and all at the time of trading which may goes against the semi strong EMH.

jeff jeffy answered 2 years ago

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