The Semistrong-Form of the Efficient Market Hypothesis Implies That ________

question 28

Multiple Choice

The semistrong-form of the efficient market hypothesis implies that ________ generate abnormal returns and ________ generate abnormal returns.

• A) technical analysis cannot; fundamental analysis can
• B) technical analysis can; fundamental analysis can
• C) technical analysis can; fundamental analysis cannot
• D) technical analysis cannot; fundamental analysis cannot

---

Definitions:

Relative Purchasing Power Parity

A theory that states the rate of appreciation or depreciation of one currency relative to another will equal the rate of inflation differentials between the two countries.

Expected Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is expected to fall.

Absolute Purchasing Power Parity

A theory that suggests that the price of goods in different countries should be equal when measured in a common currency.

Exchange Rate

The price of one country's currency in terms of another currency or currencies.