Explain the Weak-form, semi-strong from and strong-from of
Effiency?
Answer / Rohit Kumar Kukreti
In finance, efficiency refers to the relationship between risk and return in an investment. There are three forms of efficiency: Weak form, Semi-strong form, and Strong form.n
1. Weak Form: It states that current stock prices fully reflect all publicly available information, such as historical prices, dividend yields, and market indexes. In other words, it's impossible to consistently earn abnormal returns by merely analyzing public data.
2. Semi-strong Form: In addition to the information included in Weak Form, it assumes that all past transactions are also reflected in current stock prices. This means that any publicly traded information, including news and analyst reports, is already factored into the price.
3. Strong Form: It extends the assumptions of both Weak and Semi-strong forms by suggesting that insider trading is impossible because all private information, including corporate insiders' knowledge, should also be reflected in stock prices.
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