Which of the Following Is Inconsistent with the Concept of Semistrong

question 36

Multiple Choice

Which of the following is inconsistent with the concept of semistrong efficient markets?

• A)An investor hears a financial analyst on television claim that investors can earn unusually high returns by buying stocks near the end of December and selling them in early January.
• By following this advice, the investor does earn an abnormally high return on his portfolio.
• B)An investor observes that the bonds of an airline that has filed for bankruptcy are selling for an extremely low price and decides to purchase some of the bonds. Fortunately, the
• Airline overcomes its financial difficulties, the bond payments are made as promised, and
• The investor earns an extraordinarily high return on this investment.
• C)A diner in a New York City restaurant overhears two men at the next table talking about a merger between their two firms and earns high profits by purchasing stock based on this
• Information.
• D)All of the above are inconsistent with the concept of semistrong efficient markets.

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Definitions:

Contrast Effects

A phenomenon in psychology where the evaluation of something is influenced by comparisons with recently encountered contrasting objects or people.

Lateral Inhibition

A process in neural networks of the brain where the activity of neurons inhibits the activity of neighboring neurons, enhancing contrast and sharpness in sensory pathways.

Visual System

The part of the central nervous system that enables organisms to process visual detail, including structures such as the eye, the optic nerve, and the visual areas of the brain.

Cones

Photoreceptor cells in the retina of the eye responsible for color vision and functioning best in relatively bright light.