13_Sol - Ch 13 Solutions 5 The market is not weak form...

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Ch. 13 Solutions 5. The market is not weak form efficient. 15. a. Aerotech’s stock price should rise immediately after the announcement of the positive news. b. Only scenario ( ii ) indicates market efficiency. In that case, the price of the stock rises immediately to the level that reflects the new information, eliminating all possibility of abnormal returns. In the other two scenarios, there are periods of time during which an investor could trade on the information and earn abnormal returns. 18. The market is often considered to be relatively efficient up to the semi-strong form. If so, no systematic profit can be made by trading on publicly-available information. Although illegal, the lead engineer of the device can profit from purchasing the firm’s stock before the news release on the implementation of the new technology. The price should immediately and fully adjust to the new information in the article. Thus, no abnormal return can be expected from purchasing after the publication of the article. . 19.
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This note was uploaded on 10/24/2008 for the course FIN 396002 taught by Professor Na during the Spring '08 term at Auckland University of Technology.

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13_Sol - Ch 13 Solutions 5 The market is not weak form...

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