Exam 11: The Efficient Market Hypothesis

The Food and Drug Administration (FDA) just announced yesterday that they would approve a new cancer-fighting drug from King.You observe that King had an abnormal return of 0% yesterday.This suggests that

Patell and Woflson (1984) report that most of the stock-price response to corporate dividend or earnings announcements occurs within ____________ of the announcement.

QQAG has a beta of 1.7.The annualized market return yesterday was 13%, and the risk-free rate is currently 3%.You observe that QQAG had an annualized return yesterday of 20%.Assuming that markets are efficient, this suggests that

If you believe in the reversal effect, you should

The weak form of the efficient-market hypothesis contradicts

Nicholas Manufacturing just announced yesterday that its fourth quarter earnings will be 10% higher than last year's fourth quarter.Nicholas had an abnormal return of -1.2% yesterday.This suggests that

Studies of mutual fund performance

Two basic assumptions of technical analysis are that security prices adjust

Which of the following are investment superstars who have consistently shown superior performance? I) Warren Buffet II. Phoebe Buffet III. Peter Lynch IV. Merrill Lynch V. Jimmy Buffet

A support level is the price range at which a technical analyst would expect the

If stock prices follow a random walk,

On November 22, the stock price of WalMart was $69.50, and the retailer stock index was 600.30.On November 25, the stock price of WalMart was $70.25, and the retailer stock index was 605.20.Consider the ratio of WalMart to the retailer index on November 22 and November 25.WalMart is _______ the retail industry, and technical analysts who follow relative strength would advise _______ the stock.

In an efficient market the correlation coefficient between stock returns for two nonoverlapping time periods should be

Proponents of the EMH typically advocate

__________ focus more on past price movements of a firm's stock than on the underlying determinants of future profitability.

Chartists practice

QQAG just announced yesterday that its fourth quarter earnings will be 35% higher than last year's fourth quarter.You observe that QQAG had an abnormal return of -1.7% yesterday.This suggests that

Music Doctors has a beta of 2.25.The annualized market return yesterday was 12%, and the risk-free rate is currently 4%.You observe that Music Doctors had an annualized return yesterday of 15%.Assuming that markets are efficient, this suggests that

A common strategy for passive management is

_________ above which it is difficult for the market to rise.