US CMA Part 2 · Chapter 4 · Question 10 of 15
According to the semi-strong form of the efficient markets hypothesis, which of the following should NOT enable an investor to earn consistent abnormal returns?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Analyzing a company's published financial statements and press releases
Explanation
The semi-strong form states that prices reflect all publicly available information, including published financial statements, so fundamental analysis of public data should not produce consistent abnormal returns. Inside (non-public) information can still generate abnormal returns unless markets are strong-form efficient. Bearing more systematic risk earns a higher expected return, but that is a normal, not an abnormal, return.
More Corporate finance: working capital, raising capital, mergers and international finance MCQs
- Q12A target company's board adopts a plan under which, if any bidder acquires more than 15% of its shares, all other shareholders may buy…
- Q13A conglomerate creates a new independent company from one of its divisions and distributes the new company's shares to its existing…
- Q14The spot exchange rate is $1.10 per euro. One-year interest rates are 5% in the United States and 3% in the eurozone. According to…
- Q15A US exporter will receive EUR 500,000 from a German customer in 90 days. Which action hedges the exporter's transaction exposure?
- Q1A supplier offers terms of 2/10, net 40. Using a 365-day year and simple interest, what is the approximate annual cost of NOT taking the…