CFA Practice Question

CFA Practice Question

The theory of weak form market efficiency implies which of the following?

I. Technical analysis is a waste of time.
II. Fundamental analysis is a waste of time.
III. It is fruitless to try and find patterns in security market data.
A. I and II.
B. I and III.
C. I only.
Explanation: The weak form of market efficiency maintains that security prices reflect all securities market information, including historical prices, trading volume, transactions characteristics, etc. in an unbiased fashion. Since technical analysis tries to find hidden patterns in data in the hopes of exploiting such information for future gains, a direct implication of the weak form of efficiency is that technical analysis is a complete waste of time. You should remember that there is an extraordinary amount of research which seems to confirm this tenet so you should always view technical analysis with suspicion.

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nickcoulby Hahaha last line
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