Ann Uses Two Approaches to Trading Stocks

question 30

Multiple Choice

Ann uses two approaches to trading stocks. First, she trades on what she believes is a repetitive pattern as seen in Dotson Co.'s historical prices. Secondly, she analyzes the financial statements of The Allen Co. to compute changes in the return on equity as a predictor of future stock prices for that firm. She trades based on both strategies. Ann earns abnormal profits on her return on equity strategy but not on her historical prices strategy. This suggests that the market is at least ________ efficient but less than ________ efficient.

• A)weak form; mild form
• B)mild form; semistrong form
• C)weak form; semistrong form
• D)semistrong form; full form
• E)semistrong form; strong form

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.