Autocorrelation and runs tests are used to test the
A) Weak-form efficient market hypothesis (EMH).
B) Semistrong-form efficient market hypothesis (EMH).
C) Strong-form efficient market hypothesis (EMH).
D) Both a and b
E) All of the above.

Question

Quizplus · Accepted Answer

Autocorrelation and runs tests are used to test the weak-form EMH, which asserts that all past prices and trading volume data are reflected in the current market prices of a security. This means that the analysis of the past trading data cannot be used to predict future prices or returns. Autocorrelation and runs tests are used to determine whether there is any pattern or dependency in the past prices or returns of a security that can be exploited to make a profit. Therefore, the best choice is A.

Autocorrelation and Runs Tests Are Used to Test the