^&* 4. Interpreting Efficient Markets (LO2, CFA2) For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that

(1) the market is not weak form efficient, (2) the market is weak form but not semistrong form efficient, (3) the market is semistrong form but not strong form efficient, and (4) the market is strong form efficient.

a. The stock price has risen steadily each day for the past 30 days.

b. The financial statements for a company were released three days ago, and you believe you’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques that are understating the firm’s true liquidity strength.

c. You observe that the senior management of a company has been buying a lot of the company’s stock on the open market over the past week.

d. Your next-door neighbor, who happens to be a computer analyst at the local steel plant, casually mentions that a German steel conglomerate hinted yesterday that it might try to acquire the local firm in a hostile takeover.