Which form of EMH says that past prices and returns cannot be used to systematically earn abnormal returns?

Question

BlackTom AI · Accepted Answer

Weak-form EMH asserts that current asset prices fully reflect all information contained in past prices and returns, so no investor can systematically earn abnormal returns using historical price patterns.

1) Relevant knowledge points and concepts
- Efficient Market Hypothesis (EMH) has three common forms: weak, semistrong, and strong.  
- Weak-form EMH: market prices reflect all information in past trading data (prices, volumes, returns). Technical analysis (using past patterns) cannot consistently beat the market.  
- Semistrong-form EMH: prices reflect all publicly available information (financial statements, news); fundamental analysis cannot systematically earn excess returns.  
- Strong-form EMH: prices reflect all information public and private (including insider information); nobody can consistently earn abnormal returns.

2) Step-by-step reasoning
- The question asks which form specifically prohibits using past prices and returns to systematically earn abnormal returns.  
- That prohibition targets only historical/trading data (the domain of technical analysis).  
- Weak-form EMH is defined exactly by the claim that historical price/return information is already incorporated into current prices, so using it cannot produce systematic excess returns.

3) Intermediate/illustrative steps (no numerical calculation required)
- Tests of weak-form efficiency include autocorrelation (serial correlation) tests, runs tests, and variance ratio tests; if these tests show no predictable patterns, weak-form efficiency holds.  
- If weak-form holds, strategies based solely on past returns (e.g., moving-average crossovers, chart patterns) should not yield consistent abnormal profits after costs.

4) Why the correct answer is correct
- Because the weak form explicitly states that past prices and returns contain no exploitable information for systematic abnormal profits; that is the exact phraseology of the weak-form EMH.

5) Why other options are incorrect
- Semistrong-form EMH addresses all publicly available information beyond past prices (it’s broader and not focused solely on historical price data).  
- Strong-form EMH covers all information including private/insider info (again broader).  
- “None of the above” is incorrect because one of the listed options (weak-form) exactly matches the description.

6) Conclusion
- Therefore, the correct answer is Weak-form EMH, which matches the provided answer.

Which form of EMH says that past prices and returns cannot be used to systematically earn abnormal returns?单项选择题

类似问题

Suppose Apple publicly announces earnings today and the announcement is above market expectations. If markets are semistrong-form efficient, then:

In an event study, a slow price drift after a public earnings announcement is usually interpreted as

Which form of EMH says that even private information should not allow investors to systematically earn abnormal profits?

Proponents of the Efficient Market Hypothesis (EMH) typically advocate

Grossman-Stiglitz paradox implies that...[Fill in the blank]

In the context of market efficiency, ...[Fill in the blank]

In the context of market efficiency, the market is...[Fill in the blank]

In the context of market efficiency, the market is...[Fill in the blank]

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单