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Equity Investments Q120

0. Dean Jones is using trading rules to generate abnormal profits. He is most likely acting on the assumption that the market is:

  • Option : A
  • Explanation : Trading rules that consistently generate abnormal risk-adjusted returns after trading costs contradict the weak form of market efficiency. Under weak form of market efficiency, securities fully reflect all past market data. This refers to all historical price and trading volume information forming the basis of technical analysis. Hence, past trading data is already reflected in current prices and returns cannot be generated by extrapolating price trends to forecast future price movements.
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