Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis?...

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Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis? Explain.


a. The average rate of return is significantly greater than zero.


b. The correlation between the return during a given week and the return during the following week is zero.


c. One could have made superior returns by buying stock after a 10% rise in price and selling after a 10% fall.


d. One could have made higher-than-average capital gains by holding stocks with low dividend yields.



Answered Same DayDec 24, 2021

Answer To: Suppose that, after conducting an analysis of past stock prices, you come up with the following...

Robert answered on Dec 24 2021
121 Votes
One could have made superior returns by buying stock after 10% rise in price and
selling after a 1
0% fall
Reasoning--->This is a classic filter rule which should not produce superior
returns in an efficient market
This is a classic filter rule, which would appear to contradict the weak form...
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