Question

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

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

Homework Answers

Answer #1

No, this is not violating market efficiency because you will not be able to make consistent abnormal profits which means its good id you are making abnormal profits basis on the trend specified and the available information on prices and trends but as soon as other traders will notice the same trend, they will follow the same strategy and in the long run, the profits will wipe out.

I hope this makes you understand that this is not violating Market efficiently

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