Chartered Investment Manager (CIM) Practice Exam · Question
Which principle suggests that the market price of a stock already reflects all available public information?
The semi-strong form of the Efficient Market Hypothesis (EMH) posits that all publicly available information is already reflected in asset prices. Therefore, fu
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Question: Which principle suggests that the market price of a stock already reflects all available public information?
Answer options:
- Behavioral finance theory.
- Random walk theory. ✅ Efficient market hypothesis (EMH) - semi-strong form.
- Modern portfolio theory (MPT).
Correct answer: Efficient market hypothesis (EMH) - semi-strong form.
Explanation: The semi-strong form of the Efficient Market Hypothesis (EMH) posits that all publicly available information is already reflected in asset prices. Therefore, fundamental analysis or public news cannot consistently generate abnormal returns.
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