(a) Identify the form of market efficiency violated in the following cases:

i. Through the introduction of a complex computer program into the analysis of past stock price changes, a brokerage rm is able to predict price movements well enough to earn a consistent 3% prot, adjusted for risk.

ii. Finance researchers have shown that a portfolio of stocks with low Price per share/Earnings per share (PE) ratios generates higher abnormal returns than a portfolio of stocks with high PE ratios.

iii. Finance.yahoo.com allows you to nd recent insider trades of public compa- nies. You can use data from this website to form portfolios on the basis of such trades. You can buy a portfolio of companies whose insiders recently bought signicant amount of stock in their own company, and short-sell a portfolio of companies whose insiders recently sold a lot of their own stock. This investment strategy on average earns positive abnormal returns.

(b) During a trading day Green Jacket Golf Inc. announces that it has lost a contract for a large gol ng project that, prior to the news, it was widely believed to have secured. If the market is semi-strong eficient, but not strong ecient, how do you think the price reaction to this event should be? How would your answer change if the market is strong eficient?