Strategies based on technical analysis are most likely to be profitable in a market that is regarded as:
A) following a random walk.
B) semi-strong efficient.
C) not strong-form efficient.
D) not weak-form efficient.

Question

Quizplus · Accepted Answer

Technical analysis strategies are most effective in markets that are not weak-form efficient. In a weak-form efficient market, all past trading information is already reflected in stock prices, making it difficult for technical analysis, which relies on historical price and volume data, to provide an edge. Therefore, if a market is not weak-form efficient, it implies that not all historical trading information is reflected in stock prices, potentially allowing technical analysis to identify patterns that can be exploited for profit.

Strategies Based on Technical Analysis Are Most Likely to Be