Identifying a Market Anomaly in Equity Investing

Very Easy Active Equity Investing Market Anomalies

In the field of equity portfolio management, market anomalies refer to conditions that seem to contradict the efficient market hypothesis, whereby stock prices reflect all available information. Understanding these anomalies is essential for active equity investors looking to identify potential mispricings in the market.

Which of the following statements best exemplifies a market anomaly that investors may seek to exploit?

Stock prices tend to increase following positive earnings announcements.

Stocks with lower price-to-earnings (P/E) ratios tend to outperform the market on average.

Investment-grade bonds consistently yield higher returns than high-yield bonds.

Hint

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