Ifthemarketissemistrongformefficientthen

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Unformatted text preview: including public and private 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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