Question

Which of the following observations would provide evidence against the semistrong form of the efficient market theory? Mutual fund managers do not on average make superior returns. You cannot make superior profits by buying (or selling) stocks after the announcement of an abnormal rise in dividends. Low P/E stocks tend to have positive abnormal returns. In any year approximately 50% of mutual funds outperform the market.

Answer 1

Answer:

Low P/E stocks tend to have positive abnormal returns.

Explanation: If low P/E stocks tend to have positive abnormal returns, this would represent an unexploited profit opportunity that would provide evidence that investors are not using all available information to make profitable investments.