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If the market is strong form efficient, then investors could not earn abnormal returns regardless of the information they possessed
Empirical evidence indicates that markets are NOT strong form efficient and that insiders could earn abnormal returns Semistrong Form Efficiency
Semistrong Form Efficiency Prices reflect all publicly available information including trading information, annual reports, press releases, etc.
If the market is semistrong form efficient, then investors cannot earn abnormal returns by trading on public information
Implies that fundamental analysis will not lead to abnormal returns Weak Form Efficiency
Weak Form Efficiency Prices reflect all past market information such as price and volume
If the market is weak form efficient, then investors cannot earn abnormal returns by trading on market information
Implies that technical analysis will not lead to abnormal returns
Empirical evidence indicates that markets are generally weak form efficient Return, Risk, and the Return, Risk, and the Security Market Line
Chapter 13 Chapter Outline
Chapter Outline Expected Returns and Variances
Portfolios: Expected Returns and Variances
Risk: Systematic and Unsystematic
Diversification and Portfolio Risk
Total Rick and Standard Deviation
Systematic Risk and Beta
The Security Market Line and CAPM Expected Returns
Expected Returns Individual risky asset Expecte...
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- Winter '14