Which of the following statements is true?
A) In efficient markets, a stock's price should change with the arrival of new information.
B) Average stock returns are higher in January than other months.
C) Studies by Fama and French and others find that returns of high book to market stocks are much higher than low book to market value stocks to be consistent with the efficient market hypothesis.
D) All of these.
E) None of these.

Question

Quizplus · Accepted Answer

In efficient markets, stock prices reflect all available information and should adjust with new information (A). January effect is a well-documented anomaly where stock returns are higher (B). Fama and French found that high book-to-market stocks tend to have higher returns, which is an anomaly not fully explained by the efficient market hypothesis (C).

Which of the Following Statements Is True