Which of the Following Observations Provides Evidence Against Strong-Form Market

question 37

Multiple Choice

Which of the following observations provides evidence against strong-form market efficiency?

• A) Some mutual funds outperformed the market in 1997.
• B) Managers trading in their own stock obtain superior returns.
• C) You cannot make superior profits by trading stocks after earnings reports are issued.
• D) Stock prices follow a random walk.

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Definitions:

Component Cost

Component Cost is the rate of return expected by investors on a specific source of financing, such as debt or equity, contributing to the company's overall cost of capital.

WACC

Stands for Weighted Average Cost of Capital, a calculation used to assess the cost of a company's financing including equity and debt.

WACC

The Weighted Average Cost of Capital measures a firm’s cost of capital, weighting each type of capital according to its proportion.

Project Evaluation

Project evaluation involves assessing a project's viability and effectiveness in achieving its objectives, often considering factors like cost, time, and potential returns.