The following are anomalies associated with market efficiency except:
I. the small-firm effect
II. the earnings announcement puzzle
III. the new-issue puzzle
IV. trading rules based on patterns
A) I only
B) I and II only
C) I, II, and III only
D) IV only

Question

Quizplus · Accepted Answer

Anomalies associated with market efficiency refer to situations where market efficiency is violated or appears to be violated. Anomalies include findings such as the small-firm effect, the earnings announcement puzzle, and the new-issue puzzle. However, trading rules based on patterns go against the idea of market efficiency as they suggest that prices can be predicted based on past patterns and trends, which is not consistent with the efficient market hypothesis. Therefore, IV is not an anomaly associated with market efficiency, but rather a violation of it.

The Following Are Anomalies Associated with Market Efficiency Except