You Discover That You Can Make Greater Than Expected Returns

question 260

Multiple Choice

You discover that you can make greater than expected returns by buying stock in firms whenever the growth rate in sales predicted by an investment survey exceeds the stock's current price-earnings ratio. Which of the following describes this event?

• A) This would not be a violation of market efficiency.
• B) This would be a violation of weak form efficiency.
• C) This would be a violation of semi-strong form efficiency.
• D) This would be a violation of strong form efficiency but not of semi-strong form efficiency.
• E) This would be a violation of all forms of market efficiency.

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Definitions:

First Digit

The initial number in a sequence of digits, often discussed in the context of Benford's Law which predicts the distribution of first digits in many real-life sets of numerical data.

Clerical Work

Tasks related to general office management, such as filing, typing, and handling correspondence, typically requiring attention to detail.

Specialized Work

Work focused on a particular industry, sector, or area of expertise, requiring specific skills or knowledge.

Benefit Packages

A collection of non-wage compensations provided to employees in addition to their normal salaries or wages.