Based on the efficient market hypothesis,a stock's abnormal return at Time t is an indicator of
A)semistrong form inefficiency.
B)cumulative market expectations.
C)a release of new information at Time t.
D)conservatism.
E)weak form inefficiency.

Question

Quizplus · Accepted Answer

According to the efficient market hypothesis, stock prices fully reflect all available information, which means it is not possible to consistently achieve abnormal returns. Thus, if a stock's abnormal return at Time t occurs, it suggests that new information has been released that was not previously reflected in the price, indicating a semi-strong form inefficiency. Therefore, choice C, which states that abnormal returns are an indicator of a release of new information at Time t, is the best choice.

Based on the Efficient Market Hypothesis,a Stock's Abnormal Return at Time