Which statement best describes the weak-form efficient market hypothesis?

Which statement best describes the weak-form efficient market hypothesis?

• A. Stock prices reflect all historical price and volume data.
• B. Stock prices reflect all public information.
• C. Stock prices reflect all information including insider information.
• D. Stock prices reflect only current news headlines.

Answer: (A)

The weak-form efficient market hypothesis says prices already reflect all information from past trading activity, meaning historical price movements and trading volume are fully incorporated into current prices. Because of that, using past price patterns or chart analysis to try to predict future moves shouldn’t yield reliable, ongoing excess profits. The other statements describe broader information sets—public information beyond just past prices, insider information, or headlines—whose inclusion aligns with semi-strong or strong forms, not the weak-form.

The weak-form efficient market hypothesis says prices already reflect all information from past trading activity, meaning historical price movements and trading volume are fully incorporated into current prices. Because of that, using past price patterns or chart analysis to try to predict future moves shouldn’t yield reliable, ongoing excess profits. The other statements describe broader information sets—public information beyond just past prices, insider information, or headlines—whose inclusion aligns with semi-strong or strong forms, not the weak-form.