This question was discussed in detail during the April 2021 episode of the BIF Bites podcast!
The semi-strong form of the efficient market theory indicates which of the following?
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Correct answer: A. That current prices reflect past prices and all publicly available information.
Instructor insight:
In an efficient market, investors react quickly to new market-related information which leads to quick and accurate price adjustments. The Efficient Market Hypothesis (EMH) states that markets are, in fact, efficient and have three forms which describe which specific prices are reflected in the current pricing.
CFP® Exam tip:
The CFP® Exam may ask you to identify a type of security that best captures a specific market theory. An investor that believes in any of the forms of the Efficient Market Hypothesis (EMH) will likely seek to invest in Index-based Exchange Traded Funds (ETFs).