A finding that _________ would provide evidence against the semistrong form of the efficient market theory.
A) low P/E stocks tend to have positive abnormal returns
B) trend analysis is worthless in determining stock prices
C) one can consistently outperform the market by adopting the contrarian approach exemplified by the reversals phenomenon
D) a and b
E) a and c

Question

Quizplus · Accepted Answer

The semistrong form of the efficient market theory states that all publicly available information is reflected in stock prices. Option A suggests that low P/E stocks provide positive abnormal returns, which could indicate that there is still some undiscovered information not yet reflected in stock prices. Option B states that trend analysis is worthless in determining stock prices, which is consistent with the efficient market hypothesis. Option C suggests that there is a consistent way to outperform the market, which is inconsistent with the efficient market hypothesis. Therefore, options A and C provide evidence against the semistrong form of the efficient market theory.

A Finding That _________ Would Provide Evidence Against the Semistrong