Chapter 8, Problem 8CP

Summary Introduction

(A)

To determine:

The market anomaly that satisfies the strategy suggested by the grandson

Introduction:

An anomaly stands to be the exception to the efficient market hypothesis because there exist past data to validate the statement that excess risk adjusted abnormal returns are produced in the past due to an anomalies. There are various anomalies in relation to the fundamental analysis, such as the neglected firm effect, a small firm in January effect, momentum effect, book to market effect, post earnings announcement price drift and P/E effect.

Summary Introduction

(B)

To determine:

Whether the strategy suggested by the grandson will exist in the near future

Introduction:

An anomaly stands to be the exception to the efficient market hypothesis because there exist past data to validate the statement that excess risk adjusted abnormal returns are produced in the past due to an anomalies. There are various anomalies in relation to the fundamental analysis, such as the neglected firm effect, a small firm in January effect, momentum effect, book to market effect, post earnings announcement price drift and P/E effect.