Which of the following is consistent with the semi-strong form efficient market hypothesis?
A) so-called value stocks outperform growth stocks.
B) stocks that have performed well over the past year continue to perform well for several more months.
C) a company announces higher than expected sales and earnings. The stock price immediately increases by 10%.
D) a company announces higher than expected sales and earnings. The stock price remains unchanged.

Question

Quizplus · Accepted Answer

The semi-strong form of the efficient market hypothesis posits that all publicly available information is already reflected in stock prices. Therefore, when a company announces higher than expected sales and earnings (new public information), the immediate adjustment of the stock price (in this case, an increase by 10%) is consistent with the semi-strong form. This suggests that the market quickly incorporates new public information into stock prices.

Which of the Following Is Consistent with the Semi-Strong Form