Exam 7: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

When using rational expectations,forecast errors will,on average,be ________ and ________ be predicted ahead of time.

Sometimes one observes that the price of a company's stock falls after the announcement of favorable earnings.This phenomenon is

Rules used to predict movements in stock prices based on past patterns are,according to the efficient markets hypothesis

In a one-period valuation model,a decrease in the required return on investments in equity causes a(n)________ in the ________ price of a stock.

In the one-period valuation model,the current stock price increases if

If the optimal forecast of the return on a security exceeds the equilibrium return,then

You have observed that the forecasts of an investment advisor consistently outperform the other reported forecasts.The efficient markets hypothesis says that future forecasts by this advisor

A stockholder's ownership of a company's stock gives her the right to

Using the one-period valuation model,assuming a year-end dividend of $0.11,an expected sales price of $110,and a required rate of return of 10%,the current price of the stock would be

The elimination of unexploited profit opportunities requires that ________ market participants be well informed.

New information that might lead to a decrease in a stock's price might be

The efficient markets hypothesis implies that future changes in exchange rates should for all practical purposes be

Which of the following accurately summarize the empirical evidence about technical analysis?

According to the efficient markets hypothesis,purchasing the reports of financial analysts

________ and ________ may provide an explanation for stock market bubbles.

Studies of mutual fund performance indicate that mutual funds that outperformed the market in one time period usually

In the one-period valuation model,the value of a share of stock today depends upon

When Happy Feet Corporation announces that their fourth quarter earnings are up 10%,their stock price falls.This is consistent with the efficient markets hypothesis

Excessive volatility refers to the fact that

If a market participant believes that a stock price is irrationally high,they may try to borrow stock from brokers to sell in the market and then make a profit by buying the stock back again after the stock falls in price.This practice is called