Amy Uses Two Approaches to Trading Stocks

question 35

Multiple Choice

Amy uses two approaches to trading stocks.First,she trades on what she believes is a repetitive pattern as seen in Delta Co's historical prices.Secondly,she analyzes the financial statements of The Atwater 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.Amy earns excess 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:

Appearance-reality Distinction

The ability to distinguish between how things appear and how they really are.

Piaget

A Swiss psychologist renowned for his theory of cognitive development that describes how children construct a mental model of the world.

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