You analyze a firm's financial statements and invest based upon the results of this analysis. Which form of market efficiency may exist if you are able to earn abnormal profits on these investments?
A)weak form
B)historical form
C)semistrong form
D)strong form
E)mild form

Question

Quizplus · Accepted Answer

In a market characterized by weak form efficiency, all past trading information is already reflected in stock prices, but it may still be possible to earn abnormal profits by analyzing a firm's financial statements, which is not based on past trading information. This suggests that not all publicly available information (like financial statements) is reflected in the stock prices, which is a characteristic of weak form efficiency.

You Analyze a Firm's Financial Statements and Invest Based Upon