Question #$3$: Efficient Market Hypothesis $[10$ Points; $5$ Points each$]$

You are watching a broadcast of a financial market report on CNBC with a friend. The host of the show

reports that a major earthquake has just hit a region in Japan known for producing semiconductor chips,

which account for $30\%$ of global chip production. It is expected that the damage from the earthquake will

halt production in the region for several months. Your friend says, $$We should purchase stock in Taiwan

Semiconductor $($TSM$)$ because they produce semiconductor chips in the Taiwan, and their stock price

will surely rise after the earthquake disrupts production in Japan.$$

$($a$)$ Assuming that the Efficient Market Hypothesis is correct, is it likely that you can make abnormally

high returns by using this information to buy stock in TSM$?$ Why or why not?

$($b$)$ Suppose you have another friend who works for the National Earthquake Center. She calls you late at

night and mentions that a more powerful aftershock has been detected, which will cause even more severe

damage to the semiconductor factories in Japan than originally expected, causing a complete shutdown

for an extended period. The National Earthquake Center has not reported this information yet to avoid

causing widespread panic. Assuming that the Efficient Market Hypothesis is correct, is it likely that you

can make abnormally high returns by using this information to buy stock in TSM$?$ Why or why not?