You examine financial statements of companies and determine that if the ROE of a company the previous year increases, the stock will have an excess return this year. This would indicate that the market is __________ -form efficient.
A) weak
B) semistrong
C) not semistrong
D) strong
E) not weak

Question

Quizplus · Accepted Answer

If the market is not semistrong-form efficient, it means that all publicly available information, such as financial statements, is not fully reflected in stock prices. Therefore, using past financial information like ROE to predict excess returns would be possible.

You Examine Financial Statements of Companies and Determine That If