32 - List and describe the three forms of informational...

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List and describe the three forms of informational efficiency. What is the implication for technical analysis under each of these forms? In order for a market to become efficient, investors must perceive that a market is inefficient and possible to beat. Ironically, investment strategies intended to take advantage of inefficiencies are actually the fuel that keeps a market efficient. The Efficient Markets Hypothesis (EMH), which has three forms, formalizes the theory of informational efficiency: 1. The weak form of the EMH holds that all information contained in past price movements is fully reflected in current market prices. In other words, prices in a weak-form efficient market incorporate all information about price trends or repeating patterns that may have occurred in the past. This proposition implies that trading strategies based on analyses of historical pricing trends or relationship cannot consistently yield market-beating returns. Prices in a weak-form efficient market will be unpredictable and will change only in response to the arrival of new information.
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32 - List and describe the three forms of informational...

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