According to the semi-strong form of Efficient-market hypothesis, which of the following statements is correct?[Fill in the blank]

Question

BlackTom AI · Accepted Answer

The semi-strong form of the Efficient Market Hypothesis states that security prices fully and instantaneously reflect all publicly available information (financial reports, news, macroeconomic data, analyst reports). This is the key concept needed to evaluate the options.

1. Relevant knowledge points and concepts
- Weak form EMH: prices reflect all information contained in past trading data (so technical analysis is ineffective).
- Semi-strong form EMH: prices reflect all publicly available information (so fundamental analysis based on public data is ineffective).
- Strong form EMH: prices reflect all public and private (insider) information.

2. Step‑by‑step reasoning
- Under semi‑strong EMH, any new public information is rapidly incorporated into prices, removing opportunities to earn consistent abnormal returns by using that information.
- Fundamental analysis relies on publicly available financial and economic information; if markets are semi‑strong efficient, those signals are already priced in.
- Technical analysis relies on past price patterns; because semi‑strong includes weak form, past prices are already reflected too.
- Only information not publicly available (insider/private) could, in principle, lead to abnormal returns under semi‑strong — but that would violate laws/regulations and is excluded from market efficiency assumptions.

3. Calculations
- No numerical calculations are required for this conceptual question.

4. Why the correct answer is correct
- Option C precisely states the semi‑strong claim: “Security prices reflect all publicly available information, so fundamental analysis should not consistently generate abnormal returns.” That matches the definition and implications of semi‑strong EMH.

5. Why the other options are incorrect
- A: Technical analysis being best contradicts semi‑strong (and weak) EMH.
- B: Saying investors can consistently earn abnormal returns from public information contradicts the semi‑strong premise.
- D: Past price pattern analysis (technical analysis) would not yield consistent abnormal returns under semi‑strong (it’s covered by weak form).
- E: “Only private insider information is reflected” is false; semi‑strong says public info is reflected, not only private.

6. Conclusion
The correct answer is C, which matches the provided authoritative answer.

According to the semi-strong form of Efficient-market hypothesis, which of the following statements is correct?[Fill in the blank]Single choice

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