Question

please show work/formulas !

Your portfolio shows annual rates of return of -2.380%, 0.380% -4.410% 24.640%, and 10.780% respectively over the past five calendar years, Over the five year period The mean annual return is The population standard deviation is The sample standard deviation is The Coefficient of Variation is 5) Kevin analyzes the quarterly earnings statements of some fifty obscure small.cap stocks. He then buys Socording to the earnings pattern disclosed M he can generate consistent abnormal returns in this manner then this is a failure of weak form etficiency O semi-strong form efficiency strong form efficiency O of the above none of the above

Answer 1

1]

Mean annual return is calculated using AVERAGE function in Excel

Population standard deviation is calculated using STDEV.P function in Excel

Sample standard deviation is calculated using STDEV.S function in Excel

Coefficient of variation = sample standard deviation / mean annual return

UwN Annual 1 Year return 1 -2.380% 2 0.380% 3 -4.410% 4 24.640% 5 16.780% Mean Annual 7 Return 7.002% Population 8 SD 11.566% 9 Sample SD 12.931% 10cv 1.847 !

В 1 Year 2 1 32 4 3 5 4 6 5 Mean Annual 7 Return Annual return -0.0238 0.0038 -0.0441 0.2464 0.1678 |=AVERAGE(B2:B6) 8 Population SD 9 Sample SD 10 CV =STDEV.P(B2:B6) -STDEV.S(B2:B6) =B9/B7

2]

As per weak form efficiency, fundamental analysis can generate abnormal returns.

As per semi strong form efficiency, only material non-public information can generate abnormal returns.

As per strong form efficiency, neither fundamental analysis, nor material non-public information can generate abnormal returns.

The first option is correct. If Kevin can generate abnormal returns by analyzing earnings statements, this is a failure of weak form efficiency as fundamental analysis is used.

The first option is correct