Efficient Markets Hypothesis Kasetsart Agriculture, a Thai agricultural technology research firm, announced this morning that it has hired the world’s most knowledgeable and prolific agriculture researchers. Before today Kasetsart’s equity had been selling for 100 baht. Assume that no other information is received over the next week and the Thai stock market as a whole does not move.

(a) What do you expect will happen to Kasetsart’s share price?

(b) Consider the following scenarios:

(i) The share price jumps to 118 baht on the day of the announcement. In subsequent days it floats up to 123 baht, then falls back to 116 baht.

(ii) The share price jumps to 116 baht and remains at that level.

(iii) The share price gradually climbs to 116 baht over the next week.

Which scenario(s) indicate market efficiency? Which do not? Why? Provide a behavioural interpretation for each scenario.