In each of the following situations, explain the extent to which the empirical results offer reliable evidence for (or against) market efficiency.
(a) A research study using data for firms continuously listed on the Compustat computer tapes from 1953 to 1973 finds no evidence of impending bankruptcy cost reflected in stock prices as a firm's debt/equity ratio increases.
(b) One thousand stockbrokers are surveyed via questionnaire, and their stated investment preferences are classified according to industry groupings. The results can be used to explain rate of return differences across industries.
(c) A study of the relationships between size of type in the New York Times headline and size of price change (in either direction) in the subsequent day's stock index reveals a significant positive correlation. Further, when independent subjects are asked to qualify the headline news as good, neutral, or bad, the direction of the following day's price change (up or down) is discovered to vary with the quality of news (good or bad).
(d) Using 25 years of data in exhaustive regression analysis, a Barron's writer develops a statistical model that explains the 25-year period of stock returns (using 31 variables) with miniscule error?