Question

In: Finance

Discuss the empirical evidence on market under-reaction in the context of weak and semi-strong efficiency

Discuss the empirical evidence on market under-reaction in the context of weak and semi-strong efficiency

Solutions

Expert Solution

Semi-strong market is a market wherein all the relevant publicle information is easily reflected in the market price of a particluar stock. If a market found to be semi-strong efficient, the current market price of any stock is viewed as the best available unbiased predictor of reaching a fair price taking into consideration variety of publicly available information about the risk and return of that particular investment. They say that the study of any public information will not yield any type of consistent excess returns to the investors.

But there are several limitations in defining what is the publicly available information and how do the investors come across it.

Weak form of market is comprising of one set of public information that included past prices of stocks. They say that future prices cant be predicted using historical prices alone. With no relation, the chances of achieving excess reurns is extremely less.

Hope this answers your question.


Related Solutions

(b) Discuss the empirical evidence on market under-reaction in the context of weak and semi-strong form...
(b) Discuss the empirical evidence on market under-reaction in the context of weak and semi-strong form efficiency.
Does empirical evidence generally support EMH in weak or semi-strong form efficiency? Please provide some examples...
Does empirical evidence generally support EMH in weak or semi-strong form efficiency? Please provide some examples of the supportive evidence or evidence against it.
1. a) For each of the three versions of market efficiency (weak, semi-strong, and strong) give...
1. a) For each of the three versions of market efficiency (weak, semi-strong, and strong) give an example of a stock price movement (can be real or hypothetical) that would NOT be consistent with that version of efficiency. b) What sorts of factors might limit the ability of rational investors to take advantage of any pricing errors that result from the actions of “behavioral investors”?
If the stock price is overvalued, does that indicate a weak form of market efficiency, semi-strong...
If the stock price is overvalued, does that indicate a weak form of market efficiency, semi-strong form market efficiency, or strong form market efficiency? How are stock prices and market efficiency related?
The evidence from takeover announcements supports the semi-strong form of market efficiency, while the evidence from...
The evidence from takeover announcements supports the semi-strong form of market efficiency, while the evidence from earnings announcements supports just the weak form of market efficiency. (True or false)?
What are weak form, semi-strong form, and strong form efficiency? Does one form of efficiency imply...
What are weak form, semi-strong form, and strong form efficiency? Does one form of efficiency imply another?
The efficient market hypothesis is interpreted in a weak form, a semi-strong form, and a strong...
The efficient market hypothesis is interpreted in a weak form, a semi-strong form, and a strong form. First, explain the efficient market hypothesis. Then, differentiate between the three forms. Which form is most commonly accepted? Why? Do agree? Disagree? Why? What evidence did you find to support your opinion?
Explain how the Semi-Strong form EMH is tested, and also what is the general empirical evidence...
Explain how the Semi-Strong form EMH is tested, and also what is the general empirical evidence related to the Semi-Strong form EMH. Why is this evidence expected?
i)Identify a weak form efficiancy, semi-strong form efficiancy and the strong form efficiency infomation for APPLE...
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 .
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
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT