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Equity Investments Q118

118After the public announcement of higher than expected earnings, an investor makes abnormal returns by going long on the firm. This most likely violates which form of market efficiency?
  • Option : B
  • Explanation : In semi-strong efficient market, prices adjust quickly and accurately to new information and investors cannot earn abnormal profits on public announcements. Thus, the market is not semi-strong efficient. A market that is not semi-strong efficient is also not strong form efficient. However, the market could still be weak form efficient because past prices are not being used to make abnormal profits.
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