Assume That Markets Are Semi-Strong Form Efficient

question 96

Multiple Choice

Assume that markets are semi-strong form efficient. Suppose, then, that during a trading day, important new information is released for the first time concerning a certain company. This
Information indicates that one of the firm's oil fields, previously thought to be very promising, just
Came up dry. How would you expect the price of a share of stock to react to this information?

• A) The value of a share will fall over an extended period of time as investors begin to sell shares in the company.
• B) The value of a share will drop immediately to a price that reflects the value of the new information.
• C) The value of a share will fall below what is considered appropriate because of the decreased demand for the shares, but eventually the price will rise to the correct level.
• D) The value of a share will rise over a long period of time as investors sell the stock.
• E) The stock price will not change since this type of information has no impact in markets that are semi-strong form efficient.

Calculate the probability of the union of two events.

Understand and calculate the probability of complementary events.

Determine the relationship between the probability of events and their independence or exclusivity.

Apply probability concepts to real-world scenarios like job offers, insurance data, and diagnostic tests.

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Definitions:

Physical Differences

Variations in bodily attributes among individuals or groups, often incorrectly used as a basis for discriminatory practices.

National Boundaries

Imaginary or physical lines that define the territorial limits of a state, country, or nation.

Legalistic Fallacy

The incorrect assumption that legal changes directly translate to social change, overlooking the gap between the law and its practical implementation or societal acceptance.

Racial Segregation

Racial Segregation is the systematic separation of people into racial or other ethnic groups in daily life, including eating in restaurants, using public bathrooms, attending schools, and living in neighborhoods.