For all remaining discussion questions, suppose in Figure 5.3 that the stock prices of target firms in acquisitions responded to acquisition announcements over a three-day period rather than almost instantly.

Would you describe such an acquisition market as efficient? Why or why not?

Can you think of any trading strategy to take advantage of the delayed price response?

If you and many others pursued this trading strategy, what would happen to the price response to acquisition announcements?

Chapters FIGURE 53 Time series of the Meam Price Indes of the Shares of 16l Tarret Fir Trading day implications of Efficiency If financial markets are semistrong-fonm efficient, the following state- Publicly available information is not helpful in forecasting future Prices. In the absence of private information, the best forecast of future is current price, perhaps adjusted for a kng-run trend. Without private infomation, a company cannot improve the terms on which it sells securities by trying to select the optimal time to sell. Without private in formation or the willingness to accept above- average risk, investors should not expect to consistently earn above the market-average rate of return. Individuals without private infomation have two choices: They admit that markets are efficientand quittrying to forecast security prices, or can attempt to make the marketinefficient from their perspective. This involves acquiring the best available information-gathering system in the