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 all forms.

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 all publicly available information (such as earnings announcements) into stock prices immediately. This indicates inefficiency in the semistrong form, which asserts that all publicly available information should be reflected in stock prices.

Suppose That Firms with Unexpectedly High Earnings Earn Abnormally High