Question 1

(a) Identify the type of information that can beat the market under each form of market efficiency. (3 marks)

(b) Janet, a junior analyst of an investment bank, kept an eye on the share price of Temcent Company, a fintech company with abundant analysts coverage. She noticed that the share price was increased by 10% immediately after the release of annual result announcement.

She said to her senior colleague, Ricky, The share price of Temcent is over-reacted to the result announcement. Net profit was just grown by 1% last year. This is an example of violation of semi-strong-form market efficiency.

Ricky replied, Its not the case. The market is semi-strong-form efficient even though the stock price goes up after the result announcement.

Explain why Ricky is correct.