Question

Which of the following is an example that support semi-strong form efficient markets? A.) Post earnings...

Which of the following is an example that support semi-strong form efficient markets?

A.) Post earnings announcement drift

B.) the return performance of US mutual funds

C.) Royal Dutch and Shell Price Ratio of 60/40

Homework Answers

Answer #1

The return performance of United States Mutual fund in last few decades which has continuously underperformed the index supports the theory of semi Efficient market that one cannot outperform the index rate of return through utilisation of public Information because public informations are already discounted in the price.

Post earning announcement drift is a straight contradiction of semi strong form of Efficient market because market reacts abnormally as the earnings are announced which is in complete contrast with semi efficient form of market with advocates that all the public information are already discounted in the price.

Royal touch and sale price ratio of 1.5 violates the semi efficient form of market hypothesis as they are highly volatile.

So the correct answer would be option B)the return performance of US mutual funds

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