Question

In: Finance

1. A delayed stock price reaction to a news announcement is evidence of market efficiency. True...

1. A delayed stock price reaction to a news announcement is evidence of market efficiency.

True

False

2. According to semi-strong form of market efficiency, technical analysis and fundamental analysis will not help the investors.

True

False

3. The day-of-the-week effect is defined as the tendency for Monday to have a positive average rate of return.

True

False

PLEASE ANSWER ALLLLL or i will give you a thumbs down. ALSO, explain your answer. Thank you

Solutions

Expert Solution

1)

FALSE

Market efficiency refers to the degree to which market prices reflect all available, relevant information. If markets are efficient, than all information is already incorporated into prices, and so there is no way to "beat" the market because there are no under- or overvalued securities available.

In an efficient market, news announcement on stock price will already be factored in,

2)

TRUE

Semi-strong form efficiency contends that security prices have factored in available market and non-public market information. It concludes that neither fundamental nor technical analysis can be used to achieve superior gains and suggests that only material nonpublic information would benefit investors seeking to earn above average returns on investments.

Therefore, technical and fundamental analysis will not help investors in semi strong form of market efficiency.

3)

FALSE

The day-of-the-week effect refers to the tendency of stocks to exhibit relatively large returns on Fridays compared to those on Mondays.


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