The 1)_______, alternatively known as the 2)________, is a hypothesis that states that share prices reflect all information and consistent alpha generation is impossible.
- efficient market hypothesis (EMH)
- efficient market theory
The 1)___________, alternatively known as the 2)________, is a hypothesis that states that share prices reflect all information and consistent alpha generation is impossible.
- efficient market hypothesis (EMH)
- efficient market theory
It is also the theory that beating the market is impossible because stocks are already accurately priced and reflect all available information so theoretically impossible to make profits in any trading strategy.
efficient market hypothesis (EMH)
As a result, since there is no way to identify a bargain stock or use past stock price movements to predict future prices, the only way to earn higher return is by purchasing ________.
higher risk investments
The 1)__________, as a whole, theorizes that the market is generally efficient, but the theory is offered in three different versions: 2)______, 3)_______, and 4)______.
- efficient market hypothesis (EMH)
- weak
- semi-strong
- strong
There are three variations of the hypothesis – the 1)______, 2)______, and 3)_______ – which represent three different assumed levels of market efficiency.
- weak
- semi-strong
- strong forms
The three versions of the efficient market hypothesis are varying degrees of the same basic theory. The _______ suggests that today’s stock prices reflect all the data of past prices and that no form of technical analysis can be effectively utilized to aid investors in making trading decisions.
weak form
Advocates for the ________ believe that if the fundamental analysis is used, undervalued and overvalued stocks can be determined, and investors can research companies’ financial statements to increase their chances of making higher-than-market-average profits.
weak form efficiency theory
The _________ follows the belief that because all information that is public is used in the calculation of a stock’s current price, investors cannot utilize either technical or fundamental analysis to gain higher returns in the market.
semi-strong form efficiency theory
Those who subscribe to this version of the theory believe that only information that is not readily available to the public can help investors boost their returns to a performance level above that of the general market.
semi-strong form efficiency theory
The _______ version of the efficient market hypothesis states that all information—both the information available to the public and any information not publicly known—is completely accounted for in current stock prices, and there is no type of information that can give an investor an advantage on the market.
strong form
Advocates for this degree of the theory suggest that investors cannot make returns on investments that exceed normal market returns, regardless of information retrieved or research conducted.
strong form
The _________ is important because it implies that free markets are able to optimally allocate and distribute goods, services, capital, or labor (depending on what the market is for), without the need for central planning, oversight, or government authority.
efficient market hypothesis (EMH)
The 1)______ suggests that prices reflect all available information and represent an equilibrium between supply (sellers/producers) and demand (buyers/consumers). One important implication is that it is impossible to “2)_______” since there are no abnormal profit opportunities in an efficient market.
- EMH
- beat the market
