Understanding of the efficient market hypothesis

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-Demonstrate your understanding of the Efficient Market Hypothesis considering the following:

a) You have noticed that high level executives of firms listed in your country's stock market make abnormally high returns on investments in their own company's stock. Would this invalidate the weak-form efficiency market hypothesis? Would this invalidate the strong form efficiency market hypothesis?

b) Suppose that Coronavirus cases have gone down significantly. This has reduced the demand for rubber gloves. Consequently, Top Glove's earnings may drop 20% in first quarter of 2022 compared to the same quarter in 2021. Despite this big drop, Top Glove's price only fell by 2% once the news came. Is this a violation of efficient market hypothesis?

c) A rice farmer in Kedah has invested heavily in state-of-the-art fertilizers and expects a heavy harvest of rice in 6 months from now. The farmer is a bit afraid, however, that high seasonal rain during the harvest will drive down the price of rice. He went to the spot market and found the current price of rice per metric ton reasonable. What financial instrument or contract can the farmer use to reduce price risk or price uncertainty of rice? Explain.

Reference no: EM133061365

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