In the 2012 afternoon mock, I am pretty sure the answer is wrong. On the answer sheet it says that the observation is a contradiction to the semi-strong form of market efficiency and weakform market efficiency because all the information used to categorize stocks by their price-toearnings ratios is publicly available.
But weak form market efficiency only says that stock prices reflect past market information, i.e. no technical analtysis. And strong form market efficiency says that market prices reflect all information, so this observation definitly contradicts strong form market efficiency.
Look on the at the chart on page 135 of Vol 5, Weak from is the least inclusive and stong form is the most.
“It is a contradiction to the semi-strong form of market efficiency and weakform market efficiency because all the information used to categorize stocks by their price-toearnings ratios is publicly available.”
But from the CFA books, weak form only takes into account “all past market data, which refer to all historical price and volume data.” Prices being affected by publically available information do no contradict the weak from .
Btw past market price movement IS technical analysis. Also for the last time… If we go by ur answer that the statement contradicts strong form all other answers automatically become wrong coz strong form includes semi strong and weak form.
Just did that exam, I agree it’s wrong. Fundemental analysis allowing above market gains contradicts/violates both strong and semi strong. Hence it ‘least likely’ violates weak-form efficiency.