Which of the following statements is NOT consistent with the efficient market hypothesis?

• A. Asset prices fully reflect all available information at any given time.
• B. It is impossible to consistently achieve returns higher than the market average using publicly available information.
• C. Market prices adjust quickly to new information.
• D. Investors can reliably outperform the market by analyzing past price trends.

Answer: (D)

Verified step by step guidance

1. Understand the Efficient Market Hypothesis (EMH), which states that asset prices fully reflect all available information at any given time, making it impossible to consistently achieve returns higher than the market average using publicly available information.
2. Recognize that under EMH, market prices adjust quickly to new information, so any new data is almost immediately incorporated into asset prices.
3. Identify that the first three statements align with EMH: prices reflect all information, it is impossible to consistently beat the market using public info, and prices adjust quickly to new info.
4. Analyze the statement 'Investors can reliably outperform the market by analyzing past price trends' and understand that this implies predictable patterns in prices, which contradicts EMH, especially its weak form that says past price information is already reflected in current prices.
5. Conclude that the statement about reliably outperforming the market by analyzing past price trends is NOT consistent with the efficient market hypothesis.