Exam 9: Efficient Markets and Anomalies

"Special or abnormal returns" refer to:

Which of the following is a characteristic of an unfriendly takeover?

The requirements for an exchange listing tend to be highly restrictive.

Stocks that report unexpected earnings surprises seem to provide superior performances relative to the market.

Of particular interest to stock repurchases is the fact that most of the negative market movement comes on after the announcement, rather than before it.

The _________ of the efficient market hypothesis suggests that there is little or nothing to be gained from studying past stock price trends.

Recent research indicates little opportunity to profit from repurchase situations.

The stock price of an acquiring company generally changes parallel to that of the target.

In an efficient market environment, it is reasonable to assume that the higher the premium on a target company's stock, the less the risk of cancellation.

The stock of acquiring companies often increases by 60% or more as a result of a merger.

Research on the weak form of the efficient market hypothesis suggests that:

The greatest profit, and the greatest risk, arises from trying to identify an acquisition candidate before the announcement.

A stock split has no effect on the par value of a stock.

Research indicates that large, prestigious investment bankers generally provide lower initial returns to investors than smaller investment banking houses.

A stock split has no effect on the retained earnings account.

Before investing in a new stock issue, the investor should consider the management of the firm, past performance record, and intended use of funds.

Value Line's Ranking System, covering 1,700 companies, has demonstrated:

When a merger becomes relatively certain, arbitrageurs come in and attempt to lock in profits.

The study by Barry and Jennings of new stock issues indicates that 90% of the gain occurs in the opening transaction.

There is a good opportunity to achieve abnormal gains by investing in either the acquiring company's or acquired company's stock.