In order to test the semistrong form of the efficient-market hypothesis, researchers have mostly relied on the
A)estimation of the serial correlation coefficients (autocorrelations) for securities and markets.
B)measurement of the performance of technical trading strategies over the years.
C)measurement of how rapidly security prices adjust to different news items.
D)All of the options are correct.

Question

Quizplus · Accepted Answer

The semistrong form of the efficient-market hypothesis states that all publicly available information, including news items, is quickly and accurately incorporated into security prices. Therefore, measuring how rapidly security prices adjust to different news items is the most relevant way to test this hypothesis. Estimating serial correlation coefficients for securities and markets (A) is more relevant to testing the weak form, and measuring the performance of technical trading strategies (B) is more relevant to testing the strong form. D is incorrect as measuring all of the options would be redundant rather than more comprehensive.

In Order to Test the Semistrong Form of the Efficient-Market