Question

Which of the following contradicts the proposition that the stock market is weakly efficient?
a. Over 25% of mutual funds outperform the market on average.
b. Insiders earn abnormal trading profits.
c. Every January, the stock market earns above-normal returns.
d. Applications of technical trading rules fail to earn abnormal returns.

Answer 1

Answer:

The correct option is C

Explanation:

Weakly efficient or weak form efficiency is the past price movements, earnings data and volume which do not affect the stock price and could not be used to forecast the future direction.

So, the one which will contradict the stock market weakly efficient is that every January, the stock market earns above the normal return as if the market is earning above normal return, then it is in profit and not in a state of weak form.