CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Trading rules are often tested as a way of examining the validity of the weak form of the EMH. Which of the following is not an example of a typical trading rule to test the weak form of the EMH?

A. Dividend growth model
B. Percentage trading filter
C. Over-sold advance-decline ratio
D. Heavy odd-lot trading activity
Correct Answer: A

Weak form tests use current and historical security market information. This includes trading filters that look at price breakouts, advance-decline ratios that look at market mood by comparing how many stocks went up versus down, and odd-lot trading, which is usually associated with small investors and often used with contrarian strategies. Dividend growth rates are not part of the market information set; they are part of the public information set and therefore more relevant to the semi-strong form.

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