The question regarding market efficiency is whether investors can earn abnormal riskadjusted profits. If the stock price run-up occurs when only insiders are aware of the coming dividend increase, then it is a violation of strong-form, but not semistrong-form, efficiency. If the public already knows of the increase, then it is a violation of semistrong-form efficiency.

(a) Explain the relevance of the efficient market hypothesis.

(b) Describe the 3 forms of efficient market hypothesis.

(c) How is the Efficient Market Hypothesis used in the real world?