Forms of the efficient market hypothesis

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Describe the three forms of the Efficient Market Hypothesis (EMH).

Suppose that EMH does not hold and some assets are mispriced (i.e. their prices do not incorporate all available information). What implications would this situation have for the capital allocation in the overall economy?

"The existence of the post-earnings announcement price drifts provides a rejection of the EMH". Do you agree with this statement? Carefully explain your answer.

Explain why the observation that asset prices exhibit the momentum effect contradicts the EMH. Why do you think momentum exists in the first place?

Reference no: EM133065632

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