Which of the Following Would Violate the Efficient Market Hypothesis

question 8

Multiple Choice

Which of the following would violate the efficient market hypothesis?

• A)Intel has consistently generated large profits for years.
• B)Prices for shares before share splits show on average consistently positive abnormal returns.
• C)Earning abnormal returns after a firm announces surprise earnings.
• D)High earnings growth shares fail to generate higher returns for investors than low earnings growth shares.

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Definitions:

Local Monopoly

A situation where a single firm has significant control or is the only provider of a product or service in a particular local market, limiting competition.

Drugstore

is a retail shop where medications, as well as other household items and cosmetics, are sold.

Average Total Cost Curve

The graphical representation showing the relationship between the total cost per unit of output produced and the quantity of output.

Monopolistic Competition

An economic framework where numerous companies offer products that are alike but not exactly the same, granting them a certain level of control over the market.