Which of the following statements is true?
A)In efficient markets, a stock's price should change with the arrival of new information.
B)Average stock returns are higher in January than other months.
C)Studies by Fama and French and others find that returns of high book to market stocks are much higher than low book to market value stocks to be consistent with the efficient market hypothesis.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

In efficient markets, stock prices reflect all available information and should change with new information (A). The January effect suggests higher average returns in January (B). Fama and French found that high book-to-market stocks have higher returns, which challenges the efficient market hypothesis (C). Thus, all statements are true.

Which of the Following Statements Is True