Which of the following would be a viable way to earn abnormally high trading pro

Question

Which of the following would be a viable way to earn abnormally high trading profits if markets are semistrong-form efficient?

a) Buy shares in companies with low P/E ratios.

b) Buy shares in companies with recent above-average price changes.

c) Buy shares in companies with recent below-average price changes.

d) Buy shares in companies for which you have advance knowledge of an improvement in the management team.

Which of the following would be a viable way to earn abnormally high trading profits if markets are semistrong-form efficient?

Explanation / Answer

In a semi strong form efficient market, the shre prices reflect the publicly available information. Therefore it is not possible to earn abnormal high returns with such publicly available information. An investor having advance knowledge of an improvement in the management team acn earn abnorm,al high return because he has information that is not available in public.

Thus option d is correct..

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