An investor discovers that predictions about weather patterns published years in advance and found in the Farmer's Almanac are amazingly accurate. In fact,these predictions enable the investor to predict the health of the farm economy and therefore certain security prices. This finding is a violation of the:
A) moderate form of the efficient market hypothesis.
B) semistrong form of the efficient market hypothesis.
C) strong form of the efficient market hypothesis.
D) weak form of the efficient market hypothesis.
E) None of these.

Question

Quizplus · Accepted Answer

The semistrong form of the efficient market hypothesis states that all publicly available information, including historical price data and all public announcements, is already reflected in stock prices. If the predictions from the Farmer's Almanac, which are published years in advance and available to the public, are found to be accurate, then this information should already be reflected in stock prices, violating the semistrong form of the efficient market hypothesis.

An Investor Discovers That Predictions About Weather Patterns Published Years