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physicslady123
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- The answer is 50% but why isn't it 5%?
Question:
In finance, the strong form of the efficient market hypothesis states that studying financial information about stocks is a waste of time since all public and private information that might affect the stock price is already reflected in the price of the stock. However, a study of 450 stocks found that only about 8% had price movements that could be accounted for in this way. At what significance level could you accept the strong form of the efficient-market hypothesis?
I know that significance levels are usually 5%, 1%, or 10% (as confidence levels are 95%, 99%, and 90%). So, why is the answer 50%? Isn't this too large of a significance level?
In finance, the strong form of the efficient market hypothesis states that studying financial information about stocks is a waste of time since all public and private information that might affect the stock price is already reflected in the price of the stock. However, a study of 450 stocks found that only about 8% had price movements that could be accounted for in this way. At what significance level could you accept the strong form of the efficient-market hypothesis?
I know that significance levels are usually 5%, 1%, or 10% (as confidence levels are 95%, 99%, and 90%). So, why is the answer 50%? Isn't this too large of a significance level?