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Kevin analyzes the quarterly earnings statements of some fifty obscure small-cap stocks. He then buys according to the earnings pattern disclosed. If he can generate consistent abnormal returns in this manner then this is a failure of:_______.
a) weak form efficiency.
b) semi-strong form efficiency.
c) strong form efficiency.
d) all of the above.
e) none of the above.

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chidinmakpaduwa

Answer:

Semi-strong form efficiency.

Explanation:

Semi-strong form efficiency contends that security prices have factored in publicly-available market and that price changes to new equilibrium levels are reflections of that information. It is considered the most practical of all Efficient Market Hypothesis(EMH) hypotheses but is unable to explain the context for material nonpublic information (MNPI). It concludes that neither fundamental nor technical analysis can be used to achieve superior gains and suggests that only MNPI would benefit investors seeking to earn above average returns on investments.

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