Describe what is meant by market efficiency

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Question 1 - As discussed in Chapter 4, securities market prices would "self-destruct" if the definition of an efficient securities market were literally true.

What prevents prices from self-destructing?

Does the argument that prices would self-destruct conflict with efficient securities market theory? Explain why or why not.

Given that securities prices do not self-destruct, what are the implications for investors and financial reporting?

Question 2 - One implication of market efficiency in the semi-strong form is that market prices fluctuate randomly over time.

Required

a. Describe what is meant by "market efficiency in the semi-strong form." Explain how this is different from "market efficiency in the strong form."

b. Explain why stock prices would fluctuate randomly over time when the market is efficient in the semi strong form.

Reference no: EM131582871

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