T
tess
Member
Just started reading Ch 1 of the CM2 notes.
Section 1.2 says "strong form efficiency implies semi-strong form efficiency"... "semi-strong form efficient must also be weak form efficient" based on how historical price data is a subset of all publicly available information, and how publicly available information is a subset of all information.
I'm having trouble following the reasoning. For simplicity let's examine the statement "strong form efficiency implies semi-strong form efficiency".
1. In semi-strong efficiency, market price incorporates all publicly available information
2. In strong efficiency, market price incorporates all publicly available information PLUS insider knowledge
How can strong form efficiency imply semi-strong efficiency if market price in strong form efficiency incorporates insider knowledge?
Am I understanding the implication correctly - I almost feel it should be reversed.
Section 1.2 says "strong form efficiency implies semi-strong form efficiency"... "semi-strong form efficient must also be weak form efficient" based on how historical price data is a subset of all publicly available information, and how publicly available information is a subset of all information.
I'm having trouble following the reasoning. For simplicity let's examine the statement "strong form efficiency implies semi-strong form efficiency".
1. In semi-strong efficiency, market price incorporates all publicly available information
2. In strong efficiency, market price incorporates all publicly available information PLUS insider knowledge
How can strong form efficiency imply semi-strong efficiency if market price in strong form efficiency incorporates insider knowledge?
Am I understanding the implication correctly - I almost feel it should be reversed.