The semistrong form of the efficient markets hypothesis has been tested by measuring how rapidly security prices react to various news items like
I.earnings announcements;
II.dividend announcements;
III.news of takeovers;
IV.macroeconomic information
A)I and II only
B)I, II, and III only
C)IV only
D)I, II, III, and IV

Question

Quizplus · Accepted Answer

The semistrong form of the efficient markets hypothesis states that all publicly available information is already reflected in security prices. Therefore, measuring the speed of price reactions to different types of news items is an important test of this form of the hypothesis. Earnings and dividend announcements, news of takeovers, and macroeconomic information are all types of news that can be quickly incorporated into security prices, and thus all are relevant to testing the semistrong form of the hypothesis. Therefore, the best choice is D, which includes all four types of news items.

The Semistrong Form of the Efficient Markets Hypothesis Has Been