Question 1

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 2

In examining the issue of whether the choice of accounting methods affects stock prices,studies have found that

Accepted Answer

A) the decision between LIFO and FIFO for inventory accounting can significantly affect stock prices. 
B) a firm can affect its stock price if it either withholds information or provides incorrect information. 
C) accounting changes that increase accounting earnings also increase stock prices. 
D) switching depreciation methods can significantly affect stock prices. 
E) the choice between the percentage-of-completion or the completed-contract method for construction projects affect stock prices. 
A) the decision between LIFO and FIFO for inventory accounting can significantly affect stock prices. 
B) a firm can affect its stock price if it either withholds information or provides incorrect information. 
C) accounting changes that increase accounting earnings also increase stock prices. 
D) switching depreciation methods can significantly affect stock prices. 
E) the choice between the percentage-of-completion or the completed-contract method for construction projects affect stock prices.

Question 3

Which of the following tend to reinforce the argument that the financial markets are efficient?
I.Information spreads rapidly in today's world.
II.There is tremendous competition in the financial markets.
III.Market prices continually fluctuate.
IV.Market prices react suddenly to unexpected news announcements.

Accepted Answer

A) I and III only 
B) II and IV only 
C) I,II,and III only 
D) II,III,and IV only 
E) I,II,III,and IV 
A) I and III only 
B) II and IV only 
C) I,II,and III only 
D) II,III,and IV only 
E) I,II,III,and IV

Question 4

Which one of these serial coefficient values is most consistent with weak form market efficiency?

Accepted Answer

A) -1 
B) -0.5 
C) 0 
D) +0.5 
E) +1 
A) -1 
B) -0.5 
C) 0 
D) +0.5 
E) +1

Question 5

Based on the efficient market hypothesis,a stock's abnormal return at Time t is an indicator of

Accepted Answer

A) semistrong form inefficiency. 
B) cumulative market expectations. 
C) a release of new information at Time t. 
D) conservatism. 
E) weak form inefficiency. 
A) semistrong form inefficiency. 
B) cumulative market expectations. 
C) a release of new information at Time t. 
D) conservatism. 
E) weak form inefficiency.

Question 6

Sam,an avid day trader,has noticed that a particular stock has increased in value in each of the last three trading days.Given this trend,he believes the stock price will increase over the next two trading days.This is an example of

Accepted Answer

A) a timing decision. 
B) irrational exuberance. 
C) representativeness. 
D) conservatism. 
E) arbitrage. 
A) a timing decision. 
B) irrational exuberance. 
C) representativeness. 
D) conservatism. 
E) arbitrage.

Question 7

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 8

Which one of these would generally be considered the most rational action for a tax-paying investor?

Accepted Answer

A) Trading frequently 
B) Selling their losing and holding their winning securities 
C) Throwing darts to select their portfolio holdings 
D) Holding a less than fully diversified portfolio of securities 
E) Ignoring taxes when making investment decisions 
A) Trading frequently 
B) Selling their losing and holding their winning securities 
C) Throwing darts to select their portfolio holdings 
D) Holding a less than fully diversified portfolio of securities 
E) Ignoring taxes when making investment decisions

Question 9

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.

Question 10

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.

Question 11

Individuals that continually monitor the financial markets seeking mispriced securities

Accepted Answer

A) tend to make substantial profits on a daily basis. 
B) tend to make the markets more efficient. 
C) are never able to find a security that is temporarily mispriced. 
D) are always quite successful using only well-known public information as their basis of evaluation. 
E) are always quite successful using only historical price information as their basis of evaluation. 
A) tend to make substantial profits on a daily basis. 
B) tend to make the markets more efficient. 
C) are never able to find a security that is temporarily mispriced. 
D) are always quite successful using only well-known public information as their basis of evaluation. 
E) are always quite successful using only historical price information as their basis of evaluation.

Question 12

The efficient market hypothesis implies that

Accepted Answer

A) all investments should earn the same average rate of return over time. 
B) any investment should earn a normal return commensurate with the investment's risk. 
C) efficient markets will tend to have fixed prices from one day to the next. 
D) stock prices are only efficient when all investors review their portfolios on a daily basis. 
E) investors must be disinterested in their investments for the markets to be efficient. 
A) all investments should earn the same average rate of return over time. 
B) any investment should earn a normal return commensurate with the investment's risk. 
C) efficient markets will tend to have fixed prices from one day to the next. 
D) stock prices are only efficient when all investors review their portfolios on a daily basis. 
E) investors must be disinterested in their investments for the markets to be efficient.

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

In examining the issue of whether the choice of accounting methods affects stock prices,studies have found that

Which one of these serial coefficient values is most consistent with weak form market efficiency?

Based on the efficient market hypothesis,a stock's abnormal return at Time t is an indicator of

Sam,an avid day trader,has noticed that a particular stock has increased in value in each of the last three trading days.Given this trend,he believes the stock price will increase over the next two trading days.This is an example of

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

Which one of these would generally be considered the most rational action for a tax-paying investor?

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

Which one of these statements is correct?

Individuals that continually monitor the financial markets seeking mispriced securities

The efficient market hypothesis implies that

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

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Exam 13: Efficient Capital Markets and Behavioral Challenges

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

In examining the issue of whether the choice of accounting methods affects stock prices,studies have found that

Which one of these serial coefficient values is most consistent with weak form market efficiency?

Based on the efficient market hypothesis,a stock's abnormal return at Time t is an indicator of

Sam,an avid day trader,has noticed that a particular stock has increased in value in each of the last three trading days.Given this trend,he believes the stock price will increase over the next two trading days.This is an example of

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

Which one of these would generally be considered the most rational action for a tax-paying investor?

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

Which one of these statements is correct?

Individuals that continually monitor the financial markets seeking mispriced securities

The efficient market hypothesis implies that

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters