Question

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9.1 The following independent situations have occurred: Required: For each of the independent situations described above, determine with reasons whether the shares were exhibiting a weak, semi-strong,

Answer 1

Stock market efficiency can be categorized into weak, semi-strong, or strong form based on the information that influences stock prices.

Step-by-step explanation:

When analyzing the behavior of stock prices, there are three forms of market efficiency:

1. Weak-form efficiency: This occurs when stock prices fully reflect all historical market information, meaning that past price movements cannot be used to predict future price movements.
2. Semi-strong form efficiency: This occurs when stock prices not only reflect historical market information but also all publicly available information, including financial reports, news, and announcements.
3. Strong form efficiency: This occurs when stock prices reflect all information, including public and private information. In this case, no investor has an advantage in accessing information.

To determine which form of efficiency is present in each situation, you need to consider the type of information that influenced the share prices. If only past price data was considered, it would indicate weak-form efficiency. If publicly available information affected the prices, it would indicate semi-strong form efficiency. If private or insider information influenced the prices, it would suggest strong form efficiency.