Joe bought a share at $57 per share. The price promptly fell to $55. Joe held on to the share until it again reached $57 and then he sold once he had eliminated his loss. If other investors do the same to establish a trading pattern this would contradict ________.
A)the strong-form EMH
B)the weak-form EMH
C)technical analysis
D)the semi-strong-form EMH

Question

Quizplus · Accepted Answer

The weak-form EMH states that past prices and trading patterns cannot be used to gain an advantage in trading. If other investors are also using this trading pattern, it would suggest that they believe past prices can predict future prices, contradicting the weak-form EMH. The strong-form and semi-strong-form EMH would not necessarily be contradicted by this behavior, as they allow for other sources of information beyond past prices to impact stock prices. Technical analysis is a method used by investors to analyze past prices and patterns, so it is not relevant to this question.

Joe Bought a Share at $57 Per Share