According to the semistrong form of the efficient markets hypothesis, ________.
A) stock prices do not rapidly adjust to new information
B) future changes in stock prices cannot be predicted from any information that is publicly available
C) corporate insiders should have no better investment performance than other investors even if allowed to trade freely
D) arbitrage between futures and cash markets should not produce extraordinary profits

Question

Quizplus · Accepted Answer

The semistrong form of the efficient markets hypothesis argues that stock prices adjust rapidly to new public information, implying that future changes in stock prices cannot be predicted from any publicly available information. option A is incorrect because it contradicts the semistrong form of the efficient markets hypothesis. Option C is an implication of the strong form of the efficient markets hypothesis, which goes beyond the scope of the semistrong form. Option D is an implication of the no-arbitrage condition and does not relate to the semistrong form of the efficient markets hypothesis.

According to the Semistrong Form of the Efficient Markets Hypothesis