Consider a scenario where Company A trades at a price to book ratio (P/B) of 5.2, which is higher than industry P/B ratio of 4.0. Provide reasons and discuss why you expect Company A to have lower stock returns than firms in its industry over the next 5 years under the two situations: 

(1) If market is efficient; 

(2) If market is inefficient.

Answer rating: 100% (QA)

Efficient Market If the market is efficient then all relevant information about Company A is already reflected in its stock price This means that the ... View the full answer