EMH

CFA Level I
#1

I know, in week form of EMH, abnormal returns can not be earned using technical analysis and I guess in semi strong form of efficiency using fundamental analysis. There is whole variety of questions around market efficiency and I get confused with these questions, most probably because of lack of examples in Schweser material. In fact, I feel there are gaps in Schweser material as well around this topic. Could someone who has been studying using CFAI books explain(preferably with the examples) when you can earn abnormal returns and when you can not?

#2

Not trying to sound like a dink…but wouldn’t it be a lot easier for you to open your own CFAI book and read the example rather than ask someone else to explain it to you from CFA books?

#3

That will the last resort if no one helps me here. I know people post very good real world examples here from their understanding and not boring theory concepts directly from the books, which is normally easier to understand, at least for my brain, than reading the examples and concepts from the books. Moreover, I know there are some people on this forum who have finance background and can pick these concepts faster than me so I would take every advantage of their abilities rather than beating my head to understand and spending hours. Sorry If sound lazy here :stuck_out_tongue:

#4

Whats your question, seems like you’re asking for a chapter summary?

#5

lol sorry about that…Can you guys approve if my understanding is correct? Weak EMH–>Technical analysis–>No positive abnormal results(follow passive strategy) Weak EMH–>Fundamental analysis–>Positive abnormal results(active strategy can be followed) Semi Strong EMH–>Technical analysis–>?(Is this case realistic at all?) Semi Strong EMH–>Fundamental analysis–>No positive abnormal results(follow passive strategy) Strong EMH–>Any analysis–>No positive abnormal results so only passive strategy will work in this type of market.

#6

Here is a summary Weak - Technical analysis cannot make abnormal profits - Fundamental analysis can make abnormal profits - Private information can make abnormal profits Semi Strong - Technical analysis cannot make abnormal profits - Fundamental analysis cannot make abnormal profits - Private information can make abnormal profits Strong - Technical analysis cannot make abnormal profits - Fundamental analysis cannot make abnormal profits - Private information cannot make abnormal profits

#7

Thanks Andy…That is exactly I was looking for…

#8

it is very useful, thanks:)