Multiple Choice
Which of the following best describes Gordon's 'bird in the hand' fallacy in the context of positive and normative analysis?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
The semi-strong form of the efficient market hypothesis states that:
A
All publicly available information is fully reflected in asset prices.
B
All information, both public and private, is reflected in asset prices.
C
Asset prices are determined solely by investor sentiment.
D
Only past price and volume information is reflected in asset prices.
Verified step by step guidance1
Understand the Efficient Market Hypothesis (EMH) and its three forms: weak, semi-strong, and strong. Each form differs in the type of information reflected in asset prices.
Recall that the weak form states that only past price and volume information is reflected in asset prices.
Recognize that the semi-strong form states that all publicly available information is fully reflected in asset prices, meaning prices adjust quickly to new public information.
Know that the strong form claims that all information, both public and private (insider information), is reflected in asset prices.
Eliminate options that do not match the semi-strong form definition, such as those focusing only on past data, investor sentiment, or including private information.
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