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Consider the statements below: I) Because stock markets are extremely competitive, quantitative signals that forecast relative stock returns stop being able to forecast stock returns
- Consider the statements below:
I) Because stock markets are extremely competitive, quantitative signals that forecast relative stock returns stop being able to forecast stock returns shortly (ie., a couple of years or less) after investment managers begin using them.
II) On average across stocks and over time, stocks that appear expensive based on valuation ratios (e.g., high PE ratio) are in fact expensive, that is, they tend to underperform stocks that do not appear expensive.
| I and II are TRUE. | |
| I is TRUE, II is FALSE. | |
| I is FALSE, II is TRUE. | |
| I and II are FALSE. |
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