If the market is weak-form efficient, which of the following statements is true?

• A. Technical analysis can consistently outperform the market.
• B. Only insider information is reflected in market prices.
• C. Past price movements cannot be used to predict future prices.
• D. All public and private information is immediately reflected in prices.

Answer: (C)

Verified step by step guidance

1. Understand the concept of weak-form market efficiency: In a weak-form efficient market, all past trading information, such as historical prices and volumes, is fully reflected in current market prices.
2. Analyze the implication of weak-form efficiency on technical analysis: Since past price movements are already incorporated into current prices, technical analysis, which relies on past price data to predict future prices, cannot consistently outperform the market.
3. Evaluate the other statements in the context of weak-form efficiency: Insider information and all public/private information being reflected in prices relate to stronger forms of market efficiency (semi-strong and strong forms), not the weak form.
4. Conclude that the correct statement under weak-form efficiency is that past price movements cannot be used to predict future prices, because any such patterns would already be exploited and eliminated by the market.
5. Summarize that weak-form efficiency implies that only historical price data is reflected in prices, and neither technical analysis nor past price trends can provide an advantage in predicting future prices.