Market crashes and stock market bubbles are examples of: semi-strong form efficiency market inefficiency strong form...

Market crashes and stock market bubbles are examples of:

		semi-strong form efficiency
		market inefficiency
		strong form efficiency
		weak form efficiency

Expert Solution

The theory of efficient market hypothesis states that it is impossible for an investor to beat the market since market anomalies do not exist.

Option a, Semi-strong efficiency assumes that stock prices have been factored all public information. So, it not possible to use fundamental analysis to beat the market.

Option b, Market inefficiency is one which does not incorporate all available information. Excess return can therefore be made in inefficient markets. Market crashes and bubbles occur in inefficient market.

Option c, Strong form efficiency assumes that all information, public and private are reflected in stock prices. So, it is not possible to use insider trading to beat the market.

Option d, Weak form efficiency assumes that all available information is reflected in the prices. So, it is not possible to use technical analysis to achieve high returns.

Hence, the answer is option b.

jeff jeffy answered 2 years ago

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