Find below several statements about financial markets. Classify them with respect to market-efficiency. Choose the...
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Finance
Find below several statements about financial markets. Classify them with respect to market-efficiency. Choose the strongest form of efficiency prevailing from the set of the following four options:
Markets are inefficient
Weak efficiency
Semi-strong efficiency
Strong efficiency
Provide a brief rationale for your decision.
a) New information about a stock is instantaneously incorporated in the stock price.
b) A friend working in a computer company gives you the confidential information that they will release a new innovative product soon. You make a trading strategy based on this and gain a lot of money.
c) By analyzing historic data you find out that there are high returns after Swedish public holidays. You construct a successful trading strategy that exploits this relationship.
d) A professional wall-street trader identifies stocks by a sophisticated trading strategy. An ape randomly points at stocks in the Financial Times and invests in those assets. The ape outperforms the banker in terms of risk-adjusted excess returns
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