Final answer:
In terms of market efficiency, (a) indicates possible inefficiency due to delayed reaction, (b) suggests inefficiency based on systematic differences in returns, (c) points to seasonal patterns in exchange rates, and (d) implies potential insider trading or leaked information.
Step-by-step explanation:
a) The fact that shares continue to rise for two weeks after a profit increase is announced suggests that the market may not be completely efficient. If the market was efficient, the increase in profit would have been reflected immediately in the share price. However, the delay in the share price increase indicates that some investors may be slow to react or that there may be other factors at play.
b) The statement that small firms consistently earn larger returns than large firms does not align with the concept of market efficiency. In an efficient market, all relevant information is incorporated into stock prices, and therefore, there should be no systematic difference in returns between small and large firms. The fact that small firms consistently earn larger returns suggests that there may be inefficiencies in the market.
c) The statement that the Australian dollar always falls after Christmas but rises after Australia Day suggests that there may be some seasonal patterns in exchange rates. However, these patterns are not consistent with market efficiency, as efficient markets should incorporate all available information, including seasonal factors, into prices.
d) The fact that shares in target companies rise before a takeover is announced suggests that there may be some insider trading or leakage of information in the market. In an efficient market, this information would be reflected in the share prices immediately after it becomes available. The fact that the share prices rise before the announcement indicates that some investors may have access to non-public information.