Suppose that ﬁrms with unexpectedly high earnings earn abnormally high returns for several months after the announcement.This would be evidence of:
A)eﬃcient markets in the weak form.
B)ineﬃcient markets in the weak form.
C)eﬃcient markets in the semistrong form.
D)ineﬃcient markets in the semistrong form.
E)ineﬃcient markets in the strong form.

Question

Quizplus · Accepted Answer

If firms with unexpectedly high earnings continue to earn abnormally high returns for several months after the announcement, it suggests that the market is not fully incorporating this publicly available information into stock prices immediately, indicating inefficiency in the semistrong form.

Suppose That ﬁRms with Unexpectedly High Earnings Earn Abnormally High