Which of the following statements is most correct?
A) If the stock market is weak-form efficient this means you cannot use private information to outperform the market.
B) If the stock market is semistrong-form efficient, this means the expected return on stocks and bonds should be the same.
C) If the stock market is semistrong-form efficient, this means that high beta stocks should have the same expected return as low beta stocks.
D) Statements b and c are correct.
E) None of the statements above is correct.

Question

Quizplus · Accepted Answer

Weak-form efficiency implies that past price movements cannot be used to predict future prices, but private information can still be used to outperform the market. Semistrong-form efficiency means that all publicly available information is already reflected in stock prices, but it does not imply that stocks and bonds should have the same expected return or that high and low beta stocks should have the same expected return.

Which of the Following Statements Is Most Correct