Question: The Dewey, Cheetham and Howe Advisory Capital has been the best stock picker in the country for the past three years. Before it became famous,

The Dewey, Cheetham and Howe Advisory Capital has been the best stock picker in the country for the past three years. Before it became famous, its newsletter had 250 subscribers. These subscribers beat the market consistently, earning significantly higher returns after adjusting for risk and net of transaction costs. It now has 12,000 subscribers. When Dewey, Cheetham and Howe recommends a stock, the price instantly rises by several points. The subscribers currently earn only a normal return when they buy the recommended stocks because price rises before anyone can act on the information. Briefly explain this phenomenon. Is Dewey, Cheetham and Howes stock picking ability consistent with market efficiency?

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