#7.A study finds that the prices of stocks prior to large dividend increases show on average consistently positive abnormal returns. Is this a violation of the efficient market hypothesis? Explain.

#8. For each of the following phenomena, explain briefly whether they appear to violate or support the efficient market hypothesis.

(a) In a typical year, roughly half of all professionally managed mutual funds are able to outperform the S&P500.

(b) Fund managers that outperform the market on a risk-adjusted basis in one year are likely to outperform in the following year.

(c) Stock prices tend to be predictably more volatile in January than in other months.

(d) Stock prices of companies that announce increased earnings in January tend to out-perform the market in February.

(e) Stocks that perform well in one week tend to perform poorly in the following week.

#9.ABC Corp has just announced that it will change its accounting method for inventories in such a way that reported earnings will increase by 20%.There is no other surprise (i.e., information) released in the announcement.What will happen to the stock price when they make this announcement assuming the market is semi-strong efficient?