If based on the analysis we can predict future stock prices correctly then it’s a contradiction of weak form market efficiency hypothesis.
Explanation:
The weak form of the efficient market hypothesis posits that all current information is reflected in current stock prices. It explains that past stock prices do not influence current stock prices. In weak form of the efficient market hypothesis stock prices follow a random walk. Therefore, traders cannot beat the market or make greater returns by analyzing previous stock prices because stock prices are simply random and not determined by its previous values. In other words, technical analysis would be a waste of time.
The weak form of the efficient market hypothesis is one of the degrees of the efficient market hypothesis. Others are semi-strong and strong form efficiency.
Based on this backdrop, if after conducting analysis of past stock prices we get a result that shows that future stock prices are determined by current and previous stock prices, this will be a contradiction of the weak form of the efficient market hypothesis. If the analysis shows that current prices depends on previous stock prices it would be a contradiction of the weak form efficiency. If the analysis show that stock prices does not follow a random walk (random stock prices), then the analysis contradicts the weak form of the efficient market hypothesis. If based on the analysis we can predict future stock prices correctly then it’s a contradiction of weak form market efficiency hypothesis.
