What is the weak effectiveness of the form?
The weak effectiveness of the form is one of the concepts that are part of the so -called effective market theory. As the theory of price used in investment situations, this concept concerns the market assesses or evaluates information related to the security and combines this information back to the unit price of security. Unlike other ideas that are part of the effective theory of markets, the weak effectiveness of the form states that the impact of information such as technical analysis does not play only a small or any part in determining the price of security and that factors like previous market performance are more important.
The idea of a weak effectiveness of the form may be in contrast to the approach found in another concept of effective market theory known as semi -formal form. This idea believes that all public information has a certain impact on the calculation of the current price of the security. Public information may include factors such as the previous performance of security but also include factors such as economic shiftsIn the industry, changing political climate or expectations of some type of negative impact of a natural disaster on the financial security of enterprises in this industry. With weak effective form, all types of public information that affect stock prices are not considered.
The effectiveness of the weak form and the semi -column efficiency of the form allow information that is generally not known to have an impact on stock prices. For example, if an investor learns that the main executive in a particular company is going to resign and accept a position with a competitor, he may decide to invest in shares issued by a competitor before the real resignation announcement. This builds an investor to ensure that these shares to provide a chance to develop any degree of influence on the warehouse value. Although the use of this type of information may or may not be illegal, depending on current federal regulations, the investor still ZEVIt makes the risk that it earns little uselessly, especially if the announcement does not increase the value of the shares purchased.
There is no consensus between investors or analysts about the accuracy of the effective market hypothesis in general or the weak effectiveness of the form in general. Some believe that this concept has merit and is worth considering in certain investment situations. Others consider approach to somewhat useful but not as generally usable as others pronounce. As with most approaches to investing, it is possible to quote examples where it seemed that the weak effectiveness of the form, as well as a situation where the theory appears to have no significance for changes in the price of security.