Exam 11: The Efficient Market Hypothesis

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

Boeing has a beta of 1.0. The annualized market return yesterday was 11%, and the risk-free rate is currently 5%. You observe that Boeing had an annualized return yesterday of 14%. Assuming that markets are efficient, this suggests that

Which of the following are used by fundamental analysts to determine proper stock prices?I) TrendlinesII) EarningsIII) Dividend prospectsIV) Expectations of future interest ratesV) Resistance levels

Proponents of the EMH think technical analysts

Billy Bean and his success chronicled in Moneyball by Michael Lewis illustrates that teams were________________.

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

A market decline of 23% on a day when there is no significant macroeconomic event ______ consistent with the EMH because ________.

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

The likelihood of an investment newsletter's successfully predicting the direction of the market for three consecutive years by chance should be

Studies of positive earnings surprises have shown that there is

What factor of fundamental analysis has been found to have a negative impact on returns over a 3-12 month time horizon?

The stock market follows a

Studies of mutual-fund performance

Two basic assumptions of technical analysis are that security prices adjust

If stock prices follow a random walk,

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

The difference between a random walk and a submartingale is the expected price change in a random walk is ______, and the expected price change for a submartingale is ______.

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

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

Cumulative abnormal returns (CAR)