Most studies of stock market efficiency suggest that the stock market is highly

Question

Most studies of stock market efficiency suggest that the stock market is highly efficient in the weak-form and reasonably efficient in the semistrong-form. Assuming these findings are correct, which of the following statements is CORRECT?

A. You have been tracking a stock’s price over the past 6 months, and you note that this particular stock has tended to rise sharply immediately after it has fallen for three days. You can use this information to devise a trading strategy that will help you beat the market.

B. Information you read in The Wall Street Journal cannot be used to select stocks that are likely to produce above-average rates of return.

C. If you apply financial analysis properly, you can use information provided in companies’ annual reports to earn above-average returns.

D. You notice that a company’s stock price always seems to swing back and forth--whenever it by 10% or more, it seems to recover and to eventually exceed its former high. Since its price has fallen during the past 2 months, now is a great time to buy it before it takes off again.

E. Even if you possess insider information, you cannot use this information to earn above-average returns because such information will already be reflected in stock prices.

Explanation / Answer

Answer :- B

Information you read in The Wall Street journal cannot be used to select stocks that are likely to produce above average rates of return.

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