Question

i)Identify a weak form efficiancy, semi-strong form efficiancy and the strong form efficiency infomation for APPLE INC in relation to the stock market .

Answer 1

Efficient market hypothesis says that market price of the security incorporates all the information about that security and it is very difficult for an investor to consistently beat the market, that is consistently generate excess return over the market.

· Weak form of market efficiency states that market price incorporates all the historical information about the security and by analyzing past stock price an investor can not generate excess return from the market. This means that if you look at the chart price of APPLE, you might not be able to find any significant information with which you can benefit.

· Semi-strong form of market efficiency states that market prices incorporates all the publicly available information about a security and fundamental analysis of the stock will not help the investor in generating excess return from the market. If all the information about the APPLE is already incorporated in the stock price of APPLE then it would not possible for a fundamental analyst to generate excess return for the investor.

· Strong form of efficiency states that people even with insider information can not generate excess return as that information would already have been incorporated in the price. Strong form of efficiency assumes that market price has incorporate all the public as well as privately available information, so even if a senior executive of apple has some insider information and tries to take advantage of that, he would not be successful because that would have already been adjusted.