A famous anomaly in stock returns is called short-term reversal (STR). The STR anomaly is that stocks with the highest returns in one month tend to have very low returns the following month and stocks with very low returns in one month tend to have very high returns the following month. Assuming prior-month returns have no obvious association with risk, does the STR anomaly appear to violate market efficiency?

Group of answer choices

No; if markets are efficient, then stocks whose prices go up one month should go back down the next month, and vice versa.

Yes; if markets are efficient, then they should rapidly incorporate new information leaving no short-term predictability in returns immediately after.

Yes; if markets are efficient, then stocks whose prices go up one month should go back down the next month, and vice versa.

None of the above

No; this just means that the stock market does not incorporate the news in past returns very quickly.