Jimmy Khan has developed a trading rule where he buys firms with relatively high dividend yields.This trading rule has consistently earned a risk-adjusted return of 15% per month for the past 10 years.This is evidence of:
A)semi-strong form efficiency
B)semi-strong form inefficiency
C)weak-form efficiency
D)weak-form inefficiency

Question

Quizplus · Accepted Answer

If Jimmy Khan's trading rule has consistently earned a risk-adjusted return of 15% per month for the past 10 years, it suggests that the market is not fully efficient in its semi-strong form. In semi-strong form efficiency, all publicly available information, including historical prices and trading rules, should be reflected in the stock prices. However, if the market is semi-strong inefficient, trading rules like Jimmy's can generate abnormal returns.

Jimmy Khan Has Developed a Trading Rule Where He Buys