CFA Practice Question

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CFA Practice Question

Which one of the following would provide evidence against the semi-strong form of the efficient market theory?
A. About 50% of pension funds outperform the market in any year.
B. All investors have learned to exploit signals about future performance.
C. Low P/E ratio stocks tend to have positive abnormal returns over the long run.

User Contributed Comments 5

User Comment
duhon Semi-strong says that the market's are efficiently priced based on all public information (technical and fundamental tools). P/E information is available on all stocks. Thus, if C were true, one could gain from public information.
xtrailer ...that's why it's an argument against the semi-strong EMH!
rocyang I hate EMH. But personal I prefer others to believe it ;)
lquiroz92 Fundamental analysis is about future earnings, do why is B wrong?
edrei7 Signals (patterns, spikes, etc.) are used in technical analyses. Fundamental analyses are not dependent on signals, they are dependent on finding the intrinsic value of the stock by looking at future cash flows to the entity (DCF, etc.) with the financial statements as inputs with future assumptions.
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