Unformatted text preview: through the business cycle, these should not show abnormal returns around already anticipated events. If a recovery, for example, is already anticipated, the actual recovery is not news. The stock price should already reflect the coming recovery. 17. a. Consistent. Half of all managers should outperform the market based on pure luck in any year. b. Violation. This would be the basis for an "easy money" rule: simply invest with last year's best managers. c. Consistent. Predictable volatility does not convey a means to earn abnormal returns. d. Violation. The abnormal performance ought to occur in January, when the increased earnings are announced. e. Violation. Reversals offer a means to earn easy money: simply buy last week's losers. 19 a. omitted. Please see textbook and my notes for details....
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- Spring '12
- abnormal returns, abnormal excess returns, Consistent. Predictable volatility, classic filter rule