Stock market efficiency Use the following table to determine whether each scenario is representative of weak-form, semistrong-form, or strong-form stock market efficiency. Stock Market Efficiency Type Weak- Semistrong- Strong- Scenario Form Form Form Frances notices that General Electric’s stock is trading at $11.49 the day before it is scheduled to release its financial data for the quarter. Suppose Fox News runs a segment the night before General Electric plans to announce its financial data and claims that General Electric has had a down quarter due to the change in tariff policies, and as a result, Frances decides to short a large amount of stock. Once trading opens the next day, General Electric’s stock falls to $9.31 but then rises to $13.35 once their financial announcement is made. Dmitri notices Amazon’s stock continuously decreases in value in December and increases in value in January. He thinks he can profit by purchasing the stock when it has a low price in December and selling it at the beginning of the year once the price increases. Dmitri purchases the stock in December and waits until January to sell, but when he does, Amazon’s stock does not actually increase at the beginning of the year. Jake, a chief people officer of a public video game company, believes that the firm will begin to gain customers due to several top secret product releases that he knows are going to be successful. As a result of gaining customers, Jake believes that revenues will increase substantially over the next few years. Jake decides to buy stock in the company in order to benefit from what he thinks will be a huge stock price increase in the coming months. Unfortunately for Jake, when the products release, the stock price remains where it was, despite the customer’s love for the products. o
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