swtsabre asked:


The required returns on all stocks are the same, and the required returns on stocks are higher than the required returns on bonds.

The required returns on stocks equal the required returns on bonds.

A trading strategy in which you buy stocks that have recently fallen in price is likely to provide you with a return that exceeds the return on the overall stock market.

If you have insider information about a particular stock, you cannot expect to earn an above average return on this information because it is already incorporated into the current stock price.

Even if a market is semistrong-form efficient, an investor could still earn a better return than the market return if he or she had inside information.

One Response to “If the stock market is semistrong-form efficient, which of the following statements would be CORRECT?”

1. Ev!lOnE on December 27th, 2009 10:09 pm

   “The required returns on all stocks are the same, and the required returns on stocks are higher than the required returns on bonds.”

   “The required returns on stocks equal the required returns on bonds.”
   No, returns on all stocks cannot be the same. They can be higher than bonds though.

   “A trading strategy in which you buy stocks that have recently fallen in price is likely to provide you with a return that exceeds the return on the overall stock market.”
   There is no way to know this, efficient form of market does not provide insight to the rise in stock prices in future.

   “Even if a market is semistrong-form efficient, an investor could still earn a better return than the market return if he or she had inside information.”
   is Correct.

   Only in a fully efficient market, does inside information do no good. In semi strong, it takes sometime to assimilate into the system.

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