Weak-form efficiency implies that past stock returns:
A)form patterns that tend to repeat.
B)are major inputs to investors for forming trading strategies.
C)do not matter.
D)are difficult to explain.

Question

Quizplus · Accepted Answer

In weak-form efficiency, it is believed that past stock returns do not matter in predicting future stock returns. Therefore, option C is the correct answer. Option A is incorrect because it implies that there are patterns in stock returns that investors can use to make money, but weak-form efficiency suggests otherwise. Option B is incorrect because investors cannot use past stock returns to form trading strategies in weak-form efficiency. Option D is also incorrect because weak-form efficiency does not necessarily mean that past returns are difficult to explain; rather, it suggests that they do not provide any useful information for predicting future returns.

Weak-Form Efficiency Implies That Past Stock Returns