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)weak form of the efficient market hypothesis.
D)A, B, and C
E)None of the above.

Question

Quizplus · Accepted Answer

The semistrong form of the efficient market hypothesis states that all publicly available information is reflected in stock prices, including information from published reports, news sources, and other widely disseminated information. If the investor's discovery of the predictive power of the Farmer's Almanac is accurate and not already priced into the market, it would be a violation of the semistrong form of the efficient market hypothesis. The weak form of the efficient market hypothesis only considers past prices and price trends, while the moderate form adds in information from insider trading. Therefore, choices A and C do not apply. The answer is not D because the moderate form of the efficient market hypothesis is not violated in this scenario.

An Investor Discovers That Predictions About Weather Patterns Published Years