Flashcards in 6.3. Market Efficiency and Investment Strategies Deck (2)
Loading flashcards...
1
Q
Different definitions of earnings surprise.
A
• Standardized unexpected earnings (SUE)
- Difference between the earnings of the current period and the year before
- Only exact if market is weakly efficient
• Forecast error
- Difference between announced and expected earnings
Buying stocks with better than expected earnings yields in abnormal returns which questions semi-strong market efficiency
2
Q
Momentum Strategy
A
- Buy the 10 % of stocks that performed best last period
- sell short 10 % of stocks that performed worst last period
- Rebalance every period
Yields in abnormal returns which questions the weak form of market efficiency
