Suppose that firms with unexpectedly high earnings earn abnormally high returns for several months after the announcement. This would be evidence of:
A) efficient markets in the weak form.
B) inefficient markets in the weak form.
C) efficient markets in the semistrong form.
D) inefficient markets in the semistrong form.
E) inefficient markets in the strong form.

Question

Quizplus · Accepted Answer

If firms with unexpectedly high earnings continue to earn abnormally high returns for several months after the announcement, it suggests that the market is not fully incorporating this information into stock prices immediately, indicating inefficiency in the semistrong form.

Suppose That Firms with Unexpectedly High Earnings Earn Abnormally High