Event studies 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) Choices b and b
E) All of the above.

Question

Quizplus · Accepted Answer

Event studies are mainly used to test the Semistrong-form efficient market hypothesis (EMH). This hypothesis suggests that stock prices have already incorporated all publicly available information, including news and events that may have significant impacts on the stock price. The event study evaluates whether there is abnormal stock return or not around a specific event that had happened in the past. If there is any abnormal return, it could indicate that the stock market was not efficient previously. Therefore, the correct option is B, the Semistrong-form efficient market hypothesis (EMH).

Event Studies Are Used to Test the