The concept of "informational asymmetry" is inconsistent with:B) Semi-Strong Form EfficiencyC) Strong Form EfficiencyA) Weak Form EfficiencyD) Efficient Market Hypothesis
Question
The concept of "informational asymmetry" is inconsistent with:B) Semi-Strong Form EfficiencyC) Strong Form EfficiencyA) Weak Form EfficiencyD) Efficient Market Hypothesis
Solution
The concept of "informational asymmetry" is inconsistent with C) Strong Form Efficiency.
Here's why:
Informational asymmetry refers to a situation where one party in a transaction has more or better information than the other party. This can lead to an imbalance in the transaction, with the party having more information having an advantage over the other party.
On the other hand, the Strong Form Efficiency is a type of Efficient Market Hypothesis (EMH) that assumes that all information in a market, whether public or private, is accounted for in a stock's price. This means that neither insider information nor technical analysis can give an investor an advantage.
Therefore, the concept of informational asymmetry, where one party has an advantage due to more or better information, is inconsistent with the Strong Form Efficiency, which assumes that all information is accounted for in a stock's price, giving no one an advantage.
Similar Questions
Asymmetric Information:
The term 'asymmetry of information' means information in a corporation is?Select one or more:a.Not equally transparent to all stakeholdersb.Not transferable to all stakeholdersc.Equally transparent to all stakeholdersd.Transferable to all stakeholders
Which of the following statements accurately describes the association between “information asymmetry” and IPO pricing? a) This hypothesis suggests that IPOs are underpriced, on average, to help reduce the information asymmetry between managers and investors. b) It suggests that the primary motivation for underpricing an IPO is to retain informed investors in the IPO market. c) It suggests that the issuing company has the incentive to underprice an IPO to benefit the existing (original) shareholders prior to firm listing on the exchange. d) None of the other statements accurately describes the association between “information asymmetry” and IPO pricing. e) More than one of other statements accurately describes the association between “information asymmetry” and IPO pricing
Semi-strong form efficiency is a stronger form of efficiency than weak form efficiency since price histories are also public information.
The statement "Investors who trade using publicly available information should expect to earn normal profits" best reflects the:ans. weak form of the efficient market hypothesis semi-strong form of the efficient market hypothesis adverse selection hypothesis information asymmetries hypothesis Previous Marked for Review Next
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