CFA Practice Question
Which one of the following is false?
A. Assuming the CAPM is true, the size effect (in which small cap firms earn an excess return after accounting for risk measured by beta) is not a contradiction of the weak-form efficient market hypothesis.
B. Fama and French argue that excess returns to small size and high book-to-market are not contradictions of the weak-form efficient market hypothesis, as these excess returns are rewards for risks (other than beta risk).
C. The January Anomaly is a contradiction of the weak-form efficient market hypothesis (assuming that returns in January are really higher than risk considerations entail).
Explanation: Assuming the CAPM is true, the size effect (in which small cap firms earn an excess return after accounting for risk measured by beta) IS A CONTRADICTION of the weak-form efficient market hypothesis.
User Contributed Comments 3
| User | Comment |
|---|---|
| ninad123 | Size Effect uses Fundamental Analysis so contrasts Semi-Strong and with that weak form as well , GOOD Question |
| moneyguy | This weak/strong/semi-strong stuff is pointless and useless. This kind of economics is for school only, and means nothing in the real world! |
| mary11 | Just answer the question on the exam and never think of it again. |