Discuss whether the following statement is true or false:
If markets are semi-strong-form efficient,one should not observe excess returns after the announcement of a dividend increase.

Question

Quizplus · Accepted Answer

The semi-strong form of the efficient market hypothesis states that investors reassess the value of the security on the availability of any new information.This the reassessment leads to an immediate adjustment in price.Hence,an investor buying a security based on any new information would be paying on an average the actual worth of the security.Thus if the semi-strong form of efficiency holds,investors should not be able to observe excess returns after the announcement of an increase in dividend.

Discuss Whether the Following Statement Is True or False