Part V$.$ Efficient Market Hypothesis $(20$ points$)$

It is believed that the US stock market, NYSE in particular, is at least semi$-$strong form efficient.

This means that current stock prices should reflect all past and current public information

including but not limited to: historical volumes and prices, financial statements, and other

information disclosed on the annual reports. Based on our in$-$class discussion about Efficient

Market Hypothesis $($EMH$),$ analyze the $$Gamestop Phenomenon$$ occurred in the first quarter of

$2021$ and answer the following questions.

a$)$ What are the key assumptions of EMH?

b$)$ Distinguish between weak, semi$-$strong and strong form efficiency.

c$)$ Suppose your cousin invests in Gamestop and made $200\%$ return in five days while the

average market return is only $6\%$ per year. Is your cousin$$s performance a violation of

market efficiency? Why or why not? Explain in detail.

d$)$ List two arguments supporting that the Gamestop Phenomenon is consistent with EMH,

and two arguments supporting that Gamestop Phenomenon is an evidence against EMH.

e$)$ What does it mean for EMH to not hold in the perception of a hedge fund manager? How

would they make investment$/$trading decisions if EMH doesn$$t hold?