Suppose that firms that announce bad news during the first quarter generally experience negative abnormal returns during the second quarter.

f) Explain whether that would be a violation of the efficient market hypothesis.

g) Seen over a long period, stocks with high book-to-market ratios have had positive CAPM alphas, while stocks with low book-to-market ratios have had negative CAPM alphas. Discuss whether this means that the stock market is inefficient.