Degrees of Informational Efficiency
1. Weak form Efficiency:
The least restrictive form of the EMH (Efficient Market Hypothesis) is weak form efficiency, which states that future stock prices cannot be predicted by analyzing price from the past.
2. Semi-strong Form: 1. Weak form Efficiency:
The least restrictive form of the EMH (Efficient Market Hypothesis) is weak form efficiency, which states that future stock prices cannot be predicted by analyzing price from the past.
The weak form of the EMH states that security prices fully reflect any information contained in the past series of stock prices. Semi-strong form efficiency takes the information set s step further and includes all publicly available information. The semi-strong form of the EMH states that security prices fully reflect all relevant publicly available information.
3. Strong Form Efficiency:
The most extreme version of the EMH is strong form efficiency. This version states that security prices fully reflect all public and private information. In other words, even corporate insiders cannot make abnormal profits by exploiting their private; inside information about their company.
Inside information is formally called material, nonpublic information
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