True or False: The efficient markets hypothesis holds only if all investors are rational. True False Almost all financial theory and decision models assume that the financial markets are efficient. The informutionat emoiency of financial markets determiner the ability of investors to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they. Will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect What information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement: Current market prices reflect all relevant information, whether it is known publicly or privately. This statement is consistent with: Strong form efficieney Weak form efficiency Semistrong form efficiency This statement is consistent with: Strong form efficiency Weak form efficiency Semistrong form efficiency Consider that there is a weak form of efficiency in the markets. A pharmaceutical company announces that it has received Federal Drug Administration approval for a new asergy drug that completely prevents nay fever. The consensus analyst forecast for the company's earnings per share (EPS) is $4.50, but insiders know that, with this new drug, earmings wiif increase and drive the EPS to $5.00. What will happen when the company releases its next earnings report? The stock price win increase and settie at a new equalibrlum level. There will be some volataity in the stock price when the earnings report is released, but it is difficult to determine the impoct on the stock. price. However, the prices will eventualy adjust to the news announcement. The stock price will not change, hecause the market already incorporated that information in the stock price when the announcement was made