Question 1

Most tests of semi-strong efficiency are _________.

Accepted Answer

A)   designed to test whether inside information can be used to generate abnormal returns
B)   based on technical trading rules
C)   unable to generate any evidence of market anomalies
D)   joint tests of market efficiency and the risk adjustment measureE) C) and D)
F) B) and D)

Question 2

The primary objective of fundamental analysis is to identify __________.

Accepted Answer

A)   well run firms
B)   poorly run firms
C)   mis-priced stocks
D)   high P/E stocksE) None of the above
F) A) and C)

Question 3

J.M.Keyes put all his money in one stock and the stock doubled in value in a matter of months.He did this three times in a row with three different stocks.J.M.got his picture on the front page of the Wall Street Journal.However the paper never mentioned the thousands of investors who made similar bets on other stocks and lost most of their money.This is an example of the ________ problem in deciding how efficient the markets are.

Accepted Answer

A)   magnitude
B)   selection bias
C)   lucky event
D)   small firmE) All of the above
F) None of the above

Question 4

A technical analyst is most likely to be affiliated with which investment philosophy?

Accepted Answer

A)   Active management
B)   Buy and hold
C)   Passive investment
D)   Index fundsE) A) and B)
F) None of the above

Question 5

According to Markowitz and other proponents of modern portfolio theory which of the following activities would not be expected to produce any benefits?

Accepted Answer

A)   Diversification
B)   Investing in Treasury bills
C)   Investing in stocks of utility companies
D)   Engaging in active portfolio management to enhance returnsE) All of the above
F) None of the above

Question 6

Fama and French have suggested that many market anomalies can be explained as manifestations of ____________.

Accepted Answer

A)   regulatory effects
B)   high trading costs
C)   information asymmetry
D)   varying risk premiumsE) All of the above
F) B) and C)

Question 7

Most evidence indicates that U.S.stock markets are _______________________.

Accepted Answer

A)   reasonably weak form and semi-strong form efficient
B)   strong form efficient
C)   reasonably weak form but not semi- or strong form efficient
D)   neither weak form, semi- or strong form efficientE) B) and C)
F) A) and B)

Question 8

Stock prices that are stable over time _______.

Accepted Answer

A)   indicate that prices are useful indicators of true economic value
B)   indicate that the market is not incorporating new information into current stock prices
C)   ensure that an economy allocates its resources efficiently
D)   indicates that returns follow a random walk processE) A) and C)
F) C) and D)

Question 9

Which of the following is not a method employed by followers of technical analysis?

Accepted Answer

A)   Charting
B)   Relative strength analysis
C)   Earnings forecasting
D)   Trading around support and resistance levelsE) All of the above
F) A) and B)

Question 10

The lack of adequate trading volume in stock that may ultimately lead to its ability to produce excess returns is referred to as the ____________________.

Accepted Answer

A)   January effect
B)   liquidity effect
C)   neglected firm effect
D)   P/E effectE) None of the above
F) A) and B)

Question 11

Evidence by Blake,Elton and Gruber indicates that on average actively managed bond funds

Accepted Answer

A)   outperform passive fixed-income indexes __________.
B)   under perform passive fixed-income indexes by a wide margin
C)   perform as well as passive fixed-income indexes
D)   under perform passive fixed-income indexes by an amount equal to fund expensesE) A) and D)
F) A) and C)

Question 12

Fundamental indexing refers to ________.

Accepted Answer

A)   investing in index stocks in proportion to the stock's fundamental value
B)   investing in index stocks in proportion to the stock's market value
C)   investing an equal dollar amount in index stocks
D)   investing in an equal amount shares in each of the index stocksE) None of the above
F) A) and C)

Question 13

In a recent study,Fama and French found that the return on the aggregate stock market was __________ when the dividend yield was higher.

Accepted Answer

A)   higher
B)   lower
C)   unaffected
D)   more skewedE) B) and C)
F) C) and D)

Question 14

You are looking to invest in one of three stocks.Stock A has high expected earnings growth,Stock B has only modest expected earnings growth and Stock C is expected to generate poor earnings growth.Which stock is likely to generate the greatest alpha for you?

Accepted Answer

A)   Stock A
B)   Stock B
C)   Stock C
D)   You cannot tell from the information givenE) A) and B)
F) A) and C)

Question 15

Basu found that firms with high P/E ratios __________.

Accepted Answer

A)   earned higher average returns than firms with low P/E ratios
B)   earned the same average returns as firms with low P/E ratios
C)   earned lower average returns than firms with low P/E ratios
D)   had higher dividend yields than firms with low P/E ratiosE) All of the above
F) C) and D)

Question 16

Choosing stocks by searching for predictable patterns in stock prices is called ________.

Accepted Answer

A)   fundamental analysis
B)   technical analysis
C)   index management
D)   random walk investingE) B) and D)
F) None of the above

Question 17

Someone who invests in the Vanguard Index 500 mutual fund could most accurately be described as using what approach?

Accepted Answer

A)   Active management
B)   Arbitrage
C)   Fundamental analysis
D)   Passive investmentE) All of the above
F) None of the above

Question 18

Evidence suggests that there may be _______ momentum and ________ reversal patterns in stock price behavior.

Accepted Answer

A)   short-run, short-run
B)   long-run, long-run
C)   long-run, short-run
D)   short-run, long runE) A) and C)
F) B) and C)

Question 19

Most people would readily agree that the stock market is not _________.

Accepted Answer

A)   weak form efficient
B)   semi-strong form efficient
C)   strong form efficient
D)   efficient at allE) A) and D)
F) A) and B)

Question 20

Small firms have tended to earn abnormal returns primarily in __________.

Accepted Answer

A)   the month of January
B)   the month July
C)   the trough of the business cycle
D)   the peak of the business cycleE) A) and D)
F) A) and C)

Exam 8: The Efficient Market Hypothesis

According to Markowitz and other proponents of modern portfolio theory which of the following activities would not be expected to produce any benefits?

Correct Answer
verified

Stock prices that are stable over time _______.

Correct Answer
verified

A technical analyst is most likely to be affiliated with which investment philosophy?

Correct Answer
verified

Evidence by Blake,Elton and Gruber indicates that on average actively managed bond funds

Correct Answer
verified

In a recent study,Fama and French found that the return on the aggregate stock market was __________ when the dividend yield was higher.

Correct Answer
verified

Fama and French have suggested that many market anomalies can be explained as manifestations of ____________.

Correct Answer
verified

The primary objective of fundamental analysis is to identify __________.

Correct Answer
verified

Most people would readily agree that the stock market is not _________.

Correct Answer
verified

Most tests of semi-strong efficiency are _________.

Correct Answer
verified

Correct Answer
verified

Evidence suggests that there may be _ momentum and __ reversal patterns in stock price behavior.

Correct Answer
verified

Choosing stocks by searching for predictable patterns in stock prices is called ________.

Correct Answer
verified

Which of the following is not a method employed by followers of technical analysis?

Correct Answer
verified

Small firms have tended to earn abnormal returns primarily in __________.

Correct Answer
verified

Basu found that firms with high P/E ratios __________.

Correct Answer
verified

Fundamental indexing refers to ________.

Correct Answer
verified

You are looking to invest in one of three stocks.Stock A has high expected earnings growth,Stock B has only modest expected earnings growth and Stock C is expected to generate poor earnings growth.Which stock is likely to generate the greatest alpha for you?

Correct Answer
verified

Someone who invests in the Vanguard Index 500 mutual fund could most accurately be described as using what approach?

Correct Answer
verified

The lack of adequate trading volume in stock that may ultimately lead to its ability to produce excess returns is referred to as the ____________________.

Correct Answer
verified

Most evidence indicates that U.S.stock markets are _______________________.

Correct Answer
verified

Exam 8: The Efficient Market Hypothesis

According to Markowitz and other proponents of modern portfolio theory which of the following activities would not be expected to produce any benefits?

Correct AnswerverifiedShow Answer

Stock prices that are stable over time _______.

Correct AnswerverifiedShow Answer

A technical analyst is most likely to be affiliated with which investment philosophy?

Correct AnswerverifiedShow Answer

Evidence by Blake,Elton and Gruber indicates that on average actively managed bond funds

Correct AnswerverifiedShow Answer

In a recent study,Fama and French found that the return on the aggregate stock market was __________ when the dividend yield was higher.

Correct AnswerverifiedShow Answer

Fama and French have suggested that many market anomalies can be explained as manifestations of ____________.

Correct AnswerverifiedShow Answer

The primary objective of fundamental analysis is to identify __________.

Correct AnswerverifiedShow Answer

Most people would readily agree that the stock market is not _________.

Correct AnswerverifiedShow Answer

Most tests of semi-strong efficiency are _________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Evidence suggests that there may be _______ momentum and ________ reversal patterns in stock price behavior.

Correct AnswerverifiedShow Answer

Choosing stocks by searching for predictable patterns in stock prices is called ________.

Correct AnswerverifiedShow Answer

Which of the following is not a method employed by followers of technical analysis?

Correct AnswerverifiedShow Answer

Small firms have tended to earn abnormal returns primarily in __________.

Correct AnswerverifiedShow Answer

Basu found that firms with high P/E ratios __________.

Correct AnswerverifiedShow Answer

Fundamental indexing refers to ________.

Correct AnswerverifiedShow Answer

You are looking to invest in one of three stocks.Stock A has high expected earnings growth,Stock B has only modest expected earnings growth and Stock C is expected to generate poor earnings growth.Which stock is likely to generate the greatest alpha for you?

Correct AnswerverifiedShow Answer

Someone who invests in the Vanguard Index 500 mutual fund could most accurately be described as using what approach?

Correct AnswerverifiedShow Answer

The lack of adequate trading volume in stock that may ultimately lead to its ability to produce excess returns is referred to as the ____________________.

Correct AnswerverifiedShow Answer

Most evidence indicates that U.S.stock markets are _______________________.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Evidence suggests that there may be _ momentum and __ reversal patterns in stock price behavior.

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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