Which of the Following Would Violate the Efficient Market Hypothesis

question 5

Multiple Choice

Which of the following would violate the efficient market hypothesis?

• A) Intel has consistently generated large profits for years.
• B) Prices for stocks before stock splits show, on average, consistently positive abnormal returns.
• C) Investors earn abnormal returns months after a firm announces surprise earnings.
• D) High-earnings growth stocks fail to generate higher returns for investors than do low earnings growth stocks.

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Definitions:

Search Warrant

A legal document authorized by a judge or magistrate, allowing law enforcement to conduct a search of a premises for evidence of a crime.

Plea Bargaining

The process by which the accused and the prosecutor in a criminal case work out a mutually satisfactory disposition of the case, subject to court approval. Usually, plea bargaining involves the defendant's pleading guilty to a lesser offense in return for a lighter sentence.

Petty Larceny

A minor theft crime involving the stealing of property with relatively low value.

Grand Larceny

A serious theft crime involving the unlawful taking of property that exceeds a specific value, defined by law.