Which of the following empirical observations appear to contradict weak form market efficiency? a. The average rate of return of stocks is significantly greater than zero b. The month-to-month time series autocorrelation of stock returns is not significantly different from zero c. A strategy of buying recent high-return stocks (winners) and shorting recent low-return stocks (losers) provides significant positive alpha d. Low dividend stocks provide higher-than-average capital gains e. None of the above
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Which of the following empirical observations appear to contradict weak form market efficiency?
| a. |
The average |
|
| b. |
The month-to-month time series autocorrelation of stock returns is not significantly different from zero |
|
| c. |
A strategy of buying recent high-return stocks (winners) and shorting recent low-return stocks (losers) provides significant positive alpha |
|
| d. |
Low dividend stocks provide higher-than-average |
|
| e. |
None of the above |
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