What are the three forms of the Efficient Market Hypothesis?

The Efficient Market Hypothesis (EMH) states that asset prices fully reflect all available information. The three recognized forms of EMH are the weak form, semi-strong form, and strong form, each reflecting the level of information considered in determining market efficiency.

The weak form asserts that all past prices of a stock are already reflected in its current price. This implies that technical analysis, which relies on historical price patterns, cannot consistently yield excess returns, as all past information is already incorporated into stock prices.

The semi-strong form expands on this by asserting that all public information, not just past prices, is incorporated into current prices. This means that fundamental analysis, which studies economic, financial, and other qualitative and quantitative factors, cannot provide excess returns, as all publicly available information is already accounted for in the market prices.

The strong form is the most comprehensive in that it claims all information, both public and private (or insider information), is reflected in stock prices. Under this hypothesis, even those with insider information cannot consistently achieve higher returns than the market.

This framework helps investors understand the limitations of relying on different information sets when making investment decisions and highlights the efficiency of financial markets in processing relevant information. The other choices presented do not accurately encompass the