Chapter 11 The Efficient Market Hypothesis
Multiple Choice Questions
1. If you believe in the ______ form of the EMH, you believe that stock prices reflect all
relevant information including historical stock prices and current public information about the firm, but not information that is available only to insiders. A) semistrong B) strong C) weak
D) A, B, and C
E) none of the above
Answer: A Difficulty: Easy
Rationale: The semistrong form of EMH maintains that stock prices immediately reflect all historical and current public information, but not inside information. 2. Proponents of the EMH typically advocate
A) an active trading strategy. B) investing in an index fund. C) a passive investment strategy. D) A and B E) B and C
Answer: E Difficulty: Easy
Rationale: Believers of market efficiency advocate passive investment strategies, and an investment in an index fund is one of the most practical passive investment strategies, especially for small investors.
3. If you believe in the ______ form of the EMH, you believe that stock prices reflect all
information that can be derived by examining market trading data such as the history of past stock prices, trading volume or short interest. A) semistrong B) strong C) weak
D) all of the above E) none of the above
Answer: C Difficulty: Easy
Rationale: The information described above is market data, which is the data set for the weak form of market efficiency. The semistrong form includes the above plus all other public information. The strong form includes all public and private information.
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Chapter 11 The Efficient Market Hypothesis
4. If you believe in the _______ form of the EMH, you believe that stock prices reflect all available information, including information that is available only to insiders. A) semistrong B) strong C) weak
D) all of the above E) none of the above Answer: B Difficulty: Easy
Rationale: The strong form includes all public and private information. 5. If you believe in the reversal effect, you should
A) buy bonds in this period if you held stocks in the last period. B) buy stocks in this period if you held bonds in the last period. C) buy stocks this period that performed poorly last period. D) go short. E) C and D
Answer: C Difficulty: Easy
Rationale: The reversal effect states that stocks that do well in one period tend to perform poorly in the subsequent period, and vice versa. 6.
________ focus more on past price movements of a firm's stock than on the underlying determinants of future profitability. A) Credit analysts
B) Fundamental analysts C) Systems analysts D) Technical analysts E) All of the above
Answer: D Difficulty: Easy
Rationale: Technicians attempt to predict future stock prices based on historical stock prices.
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Chapter 11 The Efficient Market Hypothesis
7.
_______ above which it is difficult for the market to rise. A) Book value is a value
B) Resistance level is a value C) Support level is a value D) A and B E) A and C
Answer: B Difficulty: Easy
Rationale: When stock prices have remained stable for a long period, these prices are termed resistance levels; technicians believe it is difficult for the stock prices to penetrate these resistance levels. 8.
_________ the return on a stock beyond what would be predicted from market movements alone.
A) An excess economic return is B) An economic return is C) An abnormal return is D) A and B E) A and C
Answer: E Difficulty: Easy
Rationale: An economic return is the expected return, based on the perceived level of risk and market factors. When returns exceed these levels, the returns are called abnormal or excess economic returns.
9. The debate over whether markets are efficient will probably never be resolved because of
.
A) the lucky event issue. B) the magnitude issue. C) the selection bias issue. D) all of the above. E) none of the above.
Answer: D Difficulty: Easy
Rationale: Factors A, B, and C all exist make rigid testing of market efficiency difficult or impossible.
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(完整word版)投资学第7版TestBank答案11
