According to the semi-strong form of the efficient market hypothesis, which of the following might lead to extraordinary profits?
A) studying charts of a stock's past price behavior
B) thoroughly analyzing the state of the economy, the industry and the company's fundamentals
C) possessing private information not available to other investors
D) carefully timing trades to buy when the price is low and sell when the price is high

Question

Quizplus · Accepted Answer

The semi-strong form of the efficient market hypothesis posits that all publicly available information is already reflected in stock prices, meaning that neither technical analysis (A) nor fundamental analysis (B) should provide an investor with an advantage. Similarly, attempting to time the market (D) should not consistently yield extraordinary profits if prices fully reflect all public information. However, possessing private, non-public information (C) could allow an investor to achieve extraordinary profits, as this information is not yet reflected in the stock prices according to the semi-strong form.

According to the Semi-Strong Form of the Efficient Market Hypothesis