Which one of the following statements is true?
A)Highly positive serial correlations are indicators of market efficiency.
B)Abnormal returns limited to the announcement date are indicators of market inefficiency.
C)Market studies indicate that stock markets are only weak form efficient.
D)Studies seem to indicate stock markets are semistrong but not strong form efficient.
E)Mutual funds provide little,if any,benefit to investors.

Question

Quizplus · Accepted Answer

Studies have indicated that stock markets are semi-strong form efficient, which means that all publicly available information is reflected in stock prices. However, private information may not be fully reflected in stock prices. Highly positive serial correlations can be an indication of market inefficiency, as it suggests that stock prices are following a predictable pattern and not fully incorporating all available information. Abnormal returns limited to the announcement date can also indicate market inefficiency, as it suggests that investors may not have properly priced in the information prior to the announcement. Mutual funds can potentially provide benefits to investors, such as diversification and professional management, although the extent of these benefits can vary. Therefore, option D is the only true statement.

Which One of the Following Statements Is True