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Weak-Form Efficiency

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Weak-form efficiency
A pricing theory that the price of a security reflects the past price and trading history of the security. Theory implies that security prices follow a random walk. Related: Semistrong-form efficiency, strong-form efficiency.

Weak Form Efficiency
A version of the efficient markets theory on how markets work. It holds that the market efficiently deals with most information on a given security and reflects it in the price immediately. Specifically, weak form efficiency states that technical analysis is ineffective and that prices are on a random walk. Investors and academics disagree on how well the model works, but it is less controversial than the semi-strong form of the EMT and the strong form of the EMT.


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A capital market is said to be weakly efficient or satisfy weak-form efficiency if it fully incorporates the information in the past stock prices.
For example, a market would be described as having weak-form efficiency if it were impossible to make abnormal profits by using past prices to make to make decisions about when to make abnormal profits to buy and sell securities.
As weak-form efficiency implies past and future fund performances are independent (Fama 1970, 1991), this research assumes quarterly fund returns are not related.
 
 
 
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