Homework answers / question archive / Question: Indeed analysts do need to know where to find relevant data to make an assessment of a company's value

Question: Indeed analysts do need to know where to find relevant data to make an assessment of a company's value

Finance

Share With

Question:

Indeed analysts do need to know where to find relevant data to make an assessment of a company's value. The availability of information depends however on how efficient the market is. According to the efficient market hypothesis theory markets can be weak, semi strong, and strong, causing an analyst to use different strategies in each.

Weak-form efficiency says that investors cannot profit from looking at past movements in stock prices--the fact that stocks went down for the last few days is no reason to think that they will go up (or down) in the future.  This form has been proven by empirical tests, even though people still employ “technical analysis.”

      Semistrong-form efficiency says that all publicly available information is reflected in stock prices, hence that it won’t do much good to pore over annual reports trying to find undervalued stocks. This one is (I think) largely true, but superior analysts can still obtain and process new information fast enough to gain a small advantage.

      Strong-form efficiency says that all information, even inside information, is embedded in stock prices.  This form does not hold--insiders know more or know information sooner, and could take advantage of that information to make abnormal profits in the markets.  Trading on the basis of insider information is illegal.

What type of efficiency do we have here in the United States compared to other countries?