Autocorrelation tests can be used to test the weak form of market efficiency.

Question

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Autocorrelation tests, which measure the correlation of current price changes with past price changes, can be used to test the weak form of market efficiency by examining if past price or return data can predict future prices or returns. Weak form efficiency posits that all past trading information is already reflected in stock prices, and thus, past price movements should not predict future price movements.

Autocorrelation Tests Can Be Used to Test the Weak Form