Matt Saracen is considering a sophisticated investment strategy based on past data. Each month, he creates 10 portfolios based on short-term past returns. The return ranking period is [t-2, t-12], where t is the current month. Then, he calculates each portfolio return during the current month. The winner portfolio contains the stocks with the highest past short-term returns; the loser portfolio contains the stocks with the lowest past short-term returns. The following table shows summary statistics for the portfolios, including a portfolio that is long Portfolio 10 and short portfolio 1 (ie, 10 minus 1).

Portfolio	1	2	3	4	5	6	7	8	9	10	10 minus 1
Mean Return (%)	1.3	1.24	1.2	1.32	1.39	1.45	1.61	1.79	1.94	2.29	0.98
St. Dev. Return (%)	9.94	7.21	6.14	5.51	5.18	5.02	5.17	5.34	5.99	7.54	7.78

To test his ability to profit on this strategy, Matt runs CAPM regressions on the portfolio returns. Below is output from the regression of a portfolio that is long Portfolio 10 and short portfolio 1 (ie, 10 minus 1).

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.0391
R Square	0.0015
Adjusted R Square	-0.0012
Standard Error	0.0779
Observations	362
ANOVA
	df	SS	MS	F	Significance F
Regression	1	0.0033	0.0033	0.551	0.4584
Residual	360	2.1825	0.0061
Total	361	2.1858
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%
Intercept	0.0102	0.0041	2.4708	0.0139	0.0021	0.0183
X Variable 1	-0.0642	0.0864	-0.7423	0.4584	-0.2341	0.1058

a) What kind of strategy is Matt testing?

b) Which form or forms of the efficient markets hypothesis does this test?

c) By referring specifically to data in the regression output, indicate whether or not the results are consistent with the version of the efficient markets hypothesis being tested.

d) Briefly explain why might this test of the efficient markets hypothesis be problematic? (3 words is adequate)