Which one of the following statements is correct?
A) The weekend effect states that security prices tend to rise between Friday afternoon and Monday morning.
B) The market responds immediately to reflect insider information.
C) Low P/E stocks tend to outperform high P/E stocks on a risk-adjusted basis.
D) The market fully anticipates the information contained in an earnings announcement prior to the actual announcement.

Question

Quizplus · Accepted Answer

The statement about low P/E (Price-to-Earnings) stocks tending to outperform high P/E stocks on a risk-adjusted basis is correct. This is a reflection of the value investing principle, where stocks with lower P/E ratios are considered undervalued and thus may offer better returns when adjusted for risk compared to stocks with high P/E ratios, which might be overvalued.

Which One of the Following Statements Is Correct