You analyze the returns for stocks relative to the company logo. You find that the stocks of firms which change their in a given year tend to outperform in the following year the stocks of firms which don't change their logo

With how efficient market proponents have responded to observed anomalies in the past, what factor could you add to your model of expected returns to control for the potentially different risk exposures of companies based on changing the company logo.

If the market is not efficient, how would you invest to take advantage of your analysis and get a positive abnormal return.

A.) Long a portfolio of stocks that change their logos, short a portfolio of stocks that don't change their logos

B.) Short a portfolio of stocks that change their logos, long a portfolio of stocks that don't change their logos

C.) Long a portfolio pf stocks that change their logos, also long a portfolio of stocks that don't change their logos

D.) None of the above

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct answer is A Long a portfolio of stocks that change their logos short a portfo... View the full answer