The market for Gold & Copper Ltd opens for trading at 10 am. On a particular day the first trade of Gold & Copper's share occurs at 10.15 am and the price established in the market is $2 per share. At 10.30 am the management of the firm announces that a large deposit of gold has been discovered in one of its copper mines. The next trade of the share takes place at 10.45 am at $2 per share. However, by 11.00 am the market realises that the firm has good news and the price of share established at 11.00 was $2.50. 

(a) Is the market for Gold & Copper efficient? Why or why not? 

(b) Can you make any abnormal profit by trading the share of Gold & Silver? Explain how.

Answer rating: 100% (QA)

a Based on the given information it seems that the market for Gold Copper is not efficient because t... View the full answer