Question 1

Researchers have found that over long periods of time

Accepted Answer

A) the difference between the returns on large company and small company stocks is due solely to the difference in their risks. 
B) strong form market efficiency exists,without argument. 
C) large company stocks tend to outperform small company stocks. 
D) arbitrage has no effect on market efficiency. 
E) value stocks may outperform growth stocks on a risk-adjusted basis but no firm conclusion can be drawn. 
A) the difference between the returns on large company and small company stocks is due solely to the difference in their risks. 
B) strong form market efficiency exists,without argument. 
C) large company stocks tend to outperform small company stocks. 
D) arbitrage has no effect on market efficiency. 
E) value stocks may outperform growth stocks on a risk-adjusted basis but no firm conclusion can be drawn. E

Question 2

Donald Keim's research presents evidence that the difference in performance between small capitalization stocks and large capitalization stocks is largest in the month of

Accepted Answer

A) January. 
B) April. 
C) May. 
D) August. 
E) October. 
A) January. 
B) April. 
C) May. 
D) August. 
E) October. A

Question 3

Insider trading does not offer any advantages if the financial markets are

Accepted Answer

A) inefficient. 
B) semiweak form efficient. 
C) semistrong form efficient. 
D) strong form efficient. 
E) weak form efficient. 
A) inefficient. 
B) semiweak form efficient. 
C) semistrong form efficient. 
D) strong form efficient. 
E) weak form efficient. D

Question 4

If the financial markets are efficient,then investors should expect their investments in those markets to

Accepted Answer

A) have zero net present values. 
B) earn extraordinary returns on a routine basis. 
C) generally have positive net present values. 
D) produce arbitrage opportunities on a routine basis. 
E) produce negative returns on a routine basis. 
A) have zero net present values. 
B) earn extraordinary returns on a routine basis. 
C) generally have positive net present values. 
D) produce arbitrage opportunities on a routine basis. 
E) produce negative returns on a routine basis.

Question 5

ALLGO announced at Time t that it was acquiring DoLittle Industries.There were no other announcements affecting these firms.ALLGO's stock had daily returns of +0.1,+0,−0.5,−0.2,+0.1 for Timet − 2 to Timet + 2,respectively.The daily returns on the market were −0.1,+0.2,+0.3,−0.2,and +0.2 for Timet − 2 to Timet + 2,respectively.What is the cumulative abnormal return for these 5 days?

Accepted Answer

A)  −0.7 
B)  −0.9 
C)  −0.5 
D)  −0.8 
E)  −0.3 
A)  −0.7 
B)  −0.9 
C)  −0.5 
D)  −0.8 
E)  −0.3

Question 6

If markets are strong-form efficient,then event studies should show that new information affects a related stock's price

Accepted Answer

A) for a single day. 
B) only when the new information relates to a dividend payment. 
C) over a range of days with the overreactions exactly offsetting the underreactions. 
D) only if the information is company specific. 
E) by a very minimal amount,if any. 
A) for a single day. 
B) only when the new information relates to a dividend payment. 
C) over a range of days with the overreactions exactly offsetting the underreactions. 
D) only if the information is company specific. 
E) by a very minimal amount,if any.

Question 7

Franklin Mills announced at Time t that it just sold its worst performing division.There were no other announcements affecting the firm.The firm's stock had daily returns of −0.2,+0.1,+0.4,−0.1,+0.2 for Timet − 2 to Timet + 2,respectively.The daily returns on the market were −0.1,+0.2,+0.3,−0.2,and +0.2 for Timet − 2 to Timet + 2,respectively.What is the cumulative abnormal return for these 5 days?

Accepted Answer

A) 0)3 
B)  0.8 
C) 1)1 
D) 0)5 
E) 0)6 
A) 0)3 
B)  0.8 
C) 1)1 
D) 0)5 
E) 0)6

Question 8

If semistrong,or strong,form efficiency exists,then,on average,investors are probably best served by

Accepted Answer

A) investing based solely on a stock's past performance. 
B) avoiding all mutual funds. 
C) avoiding the stock market altogether. 
D) investing in index funds rather than in actively managed mutual funds. 
E) randomly purchasing stocks by just throwing darts. 
A) investing based solely on a stock's past performance. 
B) avoiding all mutual funds. 
C) avoiding the stock market altogether. 
D) investing in index funds rather than in actively managed mutual funds. 
E) randomly purchasing stocks by just throwing darts.

Question 9

The U.S.Securities and Exchange Commission periodically charges individuals for insider trading and claims those individuals have made unfair profits.Based on this fact,you would tend to argue that the financial markets are at best ________ form efficient.

Accepted Answer

A) weak 
B) semiweak 
C) semistrong 
D) perfect 
E) strong 
A) weak 
B) semiweak 
C) semistrong 
D) perfect 
E) strong

Question 10

Serial correlation

Accepted Answer

A) tends to prove that markets are totally inefficient. 
B) supports weak form efficiency. 
C) coefficients tend to range between 0.75 and 1. 
D) is best used to identify insider trading. 
E) best indicates that markets are semi-strong form efficient. 
A) tends to prove that markets are totally inefficient. 
B) supports weak form efficiency. 
C) coefficients tend to range between 0.75 and 1. 
D) is best used to identify insider trading. 
E) best indicates that markets are semi-strong form efficient.

Question 11

Representativeness,according to financial economists,leads to

Accepted Answer

A) overreactions in stock returns. 
B) abnormal long-term profits. 
C) stock price under reactions to new information. 
D) stable stock returns over both short and long periods of time. 
E) strong form efficient financial markets. 
A) overreactions in stock returns. 
B) abnormal long-term profits. 
C) stock price under reactions to new information. 
D) stable stock returns over both short and long periods of time. 
E) strong form efficient financial markets.

Question 12

Southern Goods announced at Time t that it was replacing its CEO.There were no other announcements affecting the firm.The stock had daily returns of 0.1,+0.2,−0.8,−0.3,+0.5 for Timet − 2 to Timet + 2,respectively.The daily returns on the market were 0.1,+0.2,−0.4,−0.2,and +0.2 for Timet − 2 to Timet + 2,respectively.What is the cumulative abnormal return for these 5 days?

Accepted Answer

A)  0.1 
B)  0.3 
C) −0.2 
D) −0.1 
E) −0.3 
A)  0.1 
B)  0.3 
C) −0.2 
D) −0.1 
E) −0.3

Question 13

The hypothesis that market prices reflect all available information of every kind is called ________ form efficiency.

Accepted Answer

A) stable 
B) weak 
C) semistrong 
D) strong 
E) open 
A) stable 
B) weak 
C) semistrong 
D) strong 
E) open

Question 14

If behavioral finance holds,this implies

Accepted Answer

A) all investors are irrational some of the time. 
B) all investors are irrational all the time. 
C) some investors are irrational some of the time. 
D) some investors are irrational all of the time. 
E) all investors are rational all of the time. 
A) all investors are irrational some of the time. 
B) all investors are irrational all the time. 
C) some investors are irrational some of the time. 
D) some investors are irrational all of the time. 
E) all investors are rational all of the time.

Question 15

Which one of these is a finding of Ritter's study of initial public offerings (IPOs)?

Accepted Answer

A) Firms with either IPOs or SEPs tend to outperform their control groups for the 5-year period following the issue of the new securities. 
B) IPOs are generally incorrectly priced at issuance because over the next 5 years the IPO firm's abnormal returns exceeded 6 percent on average. 
C) The annual returns for IPO firms during the 5-year period following an IPO are about 2 percent lower than their control group. 
D) Comparable IPO and non-IPO firms had similar returns for the 5-year period following an IPO. 
E) IPO firms tend to lose 10 percent or more of their market value in the 2 years following their IPO. 
A) Firms with either IPOs or SEPs tend to outperform their control groups for the 5-year period following the issue of the new securities. 
B) IPOs are generally incorrectly priced at issuance because over the next 5 years the IPO firm's abnormal returns exceeded 6 percent on average. 
C) The annual returns for IPO firms during the 5-year period following an IPO are about 2 percent lower than their control group. 
D) Comparable IPO and non-IPO firms had similar returns for the 5-year period following an IPO. 
E) IPO firms tend to lose 10 percent or more of their market value in the 2 years following their IPO.

Question 16

Which one of the following statements is correct concerning market efficiency?

Accepted Answer

A) New information will gradually be reflected in a stock's price to avoid any sudden change in the price of the stock in an efficient market. 
B) In an efficient market,some market participants will have an advantage over others. 
C) If a market is efficient,arbitrage opportunities should be common. 
D) Real asset markets are more efficient than financial markets. 
E) A firm will generally receive a fair price when it sells shares of stock in an efficient market. 
A) New information will gradually be reflected in a stock's price to avoid any sudden change in the price of the stock in an efficient market. 
B) In an efficient market,some market participants will have an advantage over others. 
C) If a market is efficient,arbitrage opportunities should be common. 
D) Real asset markets are more efficient than financial markets. 
E) A firm will generally receive a fair price when it sells shares of stock in an efficient market.

Question 17

Which one of these is an indicator that a market is efficient?

Accepted Answer

A) Positive serial correlation coefficients equal to or greater than 1 
B) Lack of daily price movement 
C) Lack of any adjustment for degree of risk 
D) Repetitive price patterns 
E) Normal rates of return 
A) Positive serial correlation coefficients equal to or greater than 1 
B) Lack of daily price movement 
C) Lack of any adjustment for degree of risk 
D) Repetitive price patterns 
E) Normal rates of return

Question 18

The research done by Ikenberry,Lakonishok,and Vermaelen supports the argument that mangers:

Accepted Answer

A) effectively time IPOs but not SEOs. 
B) cannot effectively time IPOs. 
C) cannot effectively time either stock sales or repurchases. 
D) effectively time stock repurchases. 
E) can effectively time stock sales but not repurchases. 
A) effectively time IPOs but not SEOs. 
B) cannot effectively time IPOs. 
C) cannot effectively time either stock sales or repurchases. 
D) effectively time stock repurchases. 
E) can effectively time stock sales but not repurchases.

Question 19

Which one of these serial correlation values is the strongest indicator of price continuation?

Accepted Answer

A) -0.5 
B) -0.25 
C) 0 
D) +0.25 
E) +0.5 
A) -0.5 
B) -0.25 
C) 0 
D) +0.25 
E) +0.5

Question 20

Which one of these statements is correct?

Accepted Answer

A) Irrationality may be related across investors. 
B) Arbitrage is risk-free. 
C) Irrationality always cancels out among a group of investors. 
D) Investors are always rational. 
E) Arbitrage eliminates all market inefficiencies. 
A) Irrationality may be related across investors. 
B) Arbitrage is risk-free. 
C) Irrationality always cancels out among a group of investors. 
D) Investors are always rational. 
E) Arbitrage eliminates all market inefficiencies.

Researchers have found that over long periods of time

Donald Keim's research presents evidence that the difference in performance between small capitalization stocks and large capitalization stocks is largest in the month of

Insider trading does not offer any advantages if the financial markets are

If the financial markets are efficient,then investors should expect their investments in those markets to

If markets are strong-form efficient,then event studies should show that new information affects a related stock's price

If semistrong,or strong,form efficiency exists,then,on average,investors are probably best served by

The U.S.Securities and Exchange Commission periodically charges individuals for insider trading and claims those individuals have made unfair profits.Based on this fact,you would tend to argue that the financial markets are at best ________ form efficient.

Serial correlation

Representativeness,according to financial economists,leads to

The hypothesis that market prices reflect all available information of every kind is called ________ form efficiency.

If behavioral finance holds,this implies

Which one of these is a finding of Ritter's study of initial public offerings (IPOs)?

Which one of the following statements is correct concerning market efficiency?

Which one of these is an indicator that a market is efficient?

The research done by Ikenberry,Lakonishok,and Vermaelen supports the argument that mangers:

Which one of these serial correlation values is the strongest indicator of price continuation?

Which one of these statements is correct?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

Exam 13: Efficient Capital Markets Amcq Behavioral Challenges

Researchers have found that over long periods of time

Donald Keim's research presents evidence that the difference in performance between small capitalization stocks and large capitalization stocks is largest in the month of

Insider trading does not offer any advantages if the financial markets are

If the financial markets are efficient,then investors should expect their investments in those markets to

If markets are strong-form efficient,then event studies should show that new information affects a related stock's price

If semistrong,or strong,form efficiency exists,then,on average,investors are probably best served by

The U.S.Securities and Exchange Commission periodically charges individuals for insider trading and claims those individuals have made unfair profits.Based on this fact,you would tend to argue that the financial markets are at best ________ form efficient.

Serial correlation

Representativeness,according to financial economists,leads to

The hypothesis that market prices reflect all available information of every kind is called ________ form efficiency.

If behavioral finance holds,this implies

Which one of these is a finding of Ritter's study of initial public offerings (IPOs)?

Which one of the following statements is correct concerning market efficiency?

Which one of these is an indicator that a market is efficient?

The research done by Ikenberry,Lakonishok,and Vermaelen supports the argument that mangers:

Which one of these serial correlation values is the strongest indicator of price continuation?

Which one of these statements is correct?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters