Discussion 1&2 - The book discusses the Efficient Market

DISCUSSION 1

The book discusses the Efficient Market Hypothesis (EMH) and its three forms. The EMH has a lot to do with information and stock prices.

· How does information get into prices?

· How do we know if prices reflect all available information?

· What are abnormal returns?

· What does the EMH have to say about abnormal returns?

DISCUSSION 2

We all remember the story about Martha Stewart, who was accused of insider trading.  If not, take a moment to research this incident, then answer the following:

· Why is it illegal to trade stocks based on inside information?

· Other than Martha Stewart, provide an example of someone who was trading stocks on inside information.