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  3. suppose it is january 1, 2020. you are devising a

Suppose it is January 1, 2020. You are devising a scheme to publish a market...

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Accounting

Suppose it is January 1, 2020. You are devising a scheme to publish a market newsletter today that will correctly predict the direction of the stock market for each of the next 3 years (1/1/2020-12/31/2020, 1/1/2021-12/31/2021, and 1/1/2022-12/31/2022). Assume that the market can only move up or down in any one year, and that you dont have any ability to predict the market. How many newsletters would you need to start today to ensure that exactly one of them will, in fact, have correctly predicted the direction of the market for each of the following three years? How many would you need to start today if you needed a newsletter that will have correctly identified the direction of the market for each of the next four years? Now place yourself at 12/31/2022. What inference might a potential client draw if you present them with the one newsletter, dated 1/1/2020, that had perfectly predicted future market movements over the past three years? In reality, what does the one perfect-foresight newsletter imply about market efficiency and your ability to perfectly predict the market? Could you infer that the market is efficient, inefficient, or completely unrelated to market efficiency? Explain.

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