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Basic Question 11 of 20
If the strong-form efficient market hypothesis is ______ then valuation models would be ______ and all securities would be correctly priced at any point in time.
B. correct; useless
C. incorrect; useful
D. incorrect; useless
E. Both B & D are correct
A. correct; useful
B. correct; useless
C. incorrect; useful
D. incorrect; useless
E. Both B & D are correct
User Contributed Comments 4
| User | Comment |
|---|---|
| ascruggs92 | This question underscores how ridiculous this hypothesis is. If valuation models were useless, how would people arrive at the fair value of an asset in the first place? How would people know the exact amount the price should adjust to news? Let me guess, its assumed that everyone knows everything and is able to instantaneously make complex calculations in their head to arrive at the same number? Should we also assumed that people will all assign the same risk adjustment to an asset based on the most recent new? Last time I checked there's no way to accurately and consistently measure future risk, and since Beta is only based on past data, it is literally useless for measuring real risk. |
| Inaganti6 | That's why the EMH is nothing but textbook filler material . If EMH was true we wouldn't have a Warren Buffett or other uber billionaires. As far as we're concerned, just read the material answer the questions and pray that you pass, anything more than that is none of your business ! |
| NOBAN | Let me add... EMH (Strong market efficiency) means the market price is ideal and would be the only price. then why do u need to determine another price through valuation? Hence valuation models would be useless. |
| khalifa92 | market efficiency "hypothesis" |
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Learning Outcome Statements
describe market anomalies
CFA® 2024 Level I Curriculum, Volume 3, Module 3.