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Question 1

What is the definition of Fundamental Analysis?

Answer 1

Analysis of various public information (e.g., sales, profits)

Fundamental analysis focuses on evaluating a stock’s intrinsic value based on economic and financial factors.

Question 2

What does Technical Analysis involve?

Answer 2

Analysis of patterns in historical prices of a stock

Technical analysis uses historical price data to forecast future price movements.

Question 3

What is the Weak Form of Efficient Market Theory?

Answer 3

Asserts that stock prices already incorporate all past market trading data and information (historical price information)

This theory suggests that past prices cannot predict future prices.

Question 4

What does the Semistrong Form of Efficient Market Theory state?

Answer 4

Asserts that stock prices already incorporate all publicly available information

This form includes all public data such as earnings announcements and economic reports.

Question 5

What is the Strong Form of Efficient Market Theory?

Answer 5

Asserts that stock prices already incorporate all information (public and private)

This theory implies that even insider information is reflected in stock prices.

Question 6

Who developed the Efficient Market Hypothesis?

Answer 6

Eugene Fama

Eugene Fama introduced the Efficient Market Hypothesis in the 1970s.

Question 7

What does the Efficient Market Hypothesis suggest about stock prices?

Answer 7

That stock prices already reflect all available information

This means stock prices are considered ‘accurate’ based on the information available.

Question 8

Fill in the blank: The theory of Efficient Market Hypothesis suggests that stock prices are _______.

Answer 8

accurate

This reflects the theory’s assertion that prices incorporate all available information.