Question

You observe the following:

•I. You use a simple trading rule: buy every stock that has gone up three days in a row, hold the stock for 2 days and then sell. On average, you make an unusual profit using this strategy.

•II. On average, the CEO of XYZ Corporation does not make unusual profits trading the stock of XYZ Corporation.

Which of the following statements is most correct?

Answer 1

Answer :- The Statement that seems to be most correct is

On average, the CEO of XYZ Corporation does not make unusual profits trading the stock of XYZ Corporation

( Explanation- Stocks are not affected by only internal information of the company and its price depends on a lot more factors, so it seems correct that CEO of XYZ Corporation does not make unusual profits trading the stock of XYZ Corporation.

Whereas, using a trading strategy like buying the stock which has gone up three days in a row and holding it for 2 days and then selling it resulting in giving investors unusual profits doesn't seem correct as the stocks that has gone up 3 days in a row does not necessarily remain up on the next two days. You can't rely on a single strategy always in order to make unusual profit.There is not a sure shot strategy in the stock market that will give you unusual profit. )