The weak form of the EMH states that (A) all past information, including security price and volume data must be reflected in the current stock price.
What is EMH?
- The efficient market hypothesis (EMH), often known as the efficient market theory, asserts that share prices represent all information and therefore persistent alpha production is impossible.
- Equities, according to the EMH, always trade at their fair value on exchanges, making it impossible for investors to buy cheap stocks or sell for overpriced prices.
- According to the weak form of the EMH, all previous information, including security price and volume data, must be represented in the current stock price.
- As a result, outperforming the entire market through skilled stock selection or market timing should be impossible, and the only way an investor can earn larger returns is by selecting riskier stocks.
Therefore, the weak form of the EMH states that (A) all past information, including security price and volume data must be reflected in the current stock price.
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The complete question is given below:
The weak form of the EMH states that ________ must be reflected in the current stock price.
A. all past information, including security price and volume data
B. all publicly available information
C. all information, including inside information
D. all costless information