Question

You have noticed that stocks have a tendency to go down after days when disease cases...

You have noticed that stocks have a tendency to go down after days when disease cases increase and vice versa. If you can make abnormal returns following this trading strategy, does this violate market efficiency?

Yes, it violates weak efficiency.

Yes, it violates semi-strong efficiency.

Yes, it violates strong efficiency.

No, it does not violate efficiency.
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Answer #1

if it is reflecting that the stock are having a tendency of going down after days when these cases are increasing and vice versa, it is meaning that the stocks are not discounting the trend into prices and it is a reflection of violation of weak market efficiency because weak market efficiency advocates that the current prices are reflecting the past performance and historical trends.

It is not a violation of strong market or semi strong market efficiency.

Correct answer would be option (A) Yes, it violates weak efficiency.

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