You Have Been Following an Investment Strategy That Involves Applying

question 38

Essay

You have been following an investment strategy that involves applying the following filter rule: (a)buy $10,000 worth of all shares that decline in price by more than 5% over the past week;and (b)sell (short)$10,000 worth of all shares that have risen in price by more than 5% over the past week.Over the past year,the return on this strategy has been 30%,while the return on the ASX 200 Index over the year was 12%.Does this demonstrate that the market is not semi- strong- form efficient? Discuss.

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Definitions:

Markdown

A reduction from the original or listed price of an item, often used as a strategy to increase sales or clear out inventory.

Timing

The selection of the most appropriate moment to execute an action in order to maximize its effectiveness or success.

Final Selling Price

The ultimate price at which a product or service is sold to the consumer, including all discounts, promotions, and negotiations.

Original Markup

The difference between the cost of a product and its initial selling price, set to achieve a desired profit margin.