Which statement is true concerning alternative efficient market hypothesis?
A) The weak hypothesis encompasses the semi-strong hypothesis.
B) The weak hypothesis encompasses the strong hypothesis.
C) The semi-strong hypothesis encompasses the weak hypothesis.
D) The strong hypothesis relates only to public information.
E) All of the above statements are false.

Question

Quizplus · Accepted Answer

The semi-strong hypothesis states that all publicly available information is already reflected in a stock's price, while the weak hypothesis only states that past prices and volume patterns cannot be used to predict future prices. Therefore, the semi-strong hypothesis encompasses the weak hypothesis. The strong hypothesis goes even further to claim that all information, including private information, is already reflected in a stock's price. Option D is incorrect because the strong hypothesis also includes private information. Option A and B are both false because the weak hypothesis does not encompass the semi-strong or strong hypotheses.

Which Statement Is True Concerning Alternative Efficient Market Hypothesis