This question is a continuation of the \"Contagious Speculation and a Cure for C

Question

This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. This question is a continuation of the "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar" from your Practice at the end of the session. So read that first if you do not remember, and then continue. After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998. According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information. What form of market efficiency does this stock rise violate? Market efficiency is not violated. Weak form. Semi-strong form. Strong form. Market efficiency is not violated. Weak form. Semi-strong form. Strong form.

Explanation / Answer

Answer: -

The market efficiency of the stock rise violates is 'Strong Form'.

'Strong Form' of market efficiency hypotheses incorporates both 'Weak form' and 'Semi-strong Form' as it reflects all the information from. Strong Form has assumption that stock price reflects all information public and private arena and no investor will profit above the average investor with the new information given to it.

With the NYT publication didn't contain any new information regarding but still the stock price rose from $12.063 to $85 nearly rise of 700% in a day, hence a 'private' information present with few traders have given rise to the stock prices, these few investors traded this stock which enhanced the stock price thereby benefiting the few investors who had initially taken the stock at the start of trading session of May 4, 1998. These few investors benefitted from the average investor hence there is violation of market efficiency of 'Strong Form' with private information.

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