Question 1

Which of the following is NOT an advantage of listing a stock on an exchange?

Accepted Answer

A) A market for the stock is maintained by a specialist 
B) Minimum size and performance criteria for listing are quite restrictive 
C) There is usually a significant increase in stock price upon approval for listing 
D) More than one of the above 
A) A market for the stock is maintained by a specialist 
B) Minimum size and performance criteria for listing are quite restrictive 
C) There is usually a significant increase in stock price upon approval for listing 
D) More than one of the above

Question 2

The semi-strong form of the EMH is generally confirmed by research evidence, with some exceptions.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are reasons why an investment banker may under-price a new stock issue, except:

Accepted Answer

A) to stimulate demand for the issue. 
B) to reduce unwanted inventory. 
C) to insure adequate demand in the secondary market. 
D) None of the above 
A) to stimulate demand for the issue. 
B) to reduce unwanted inventory. 
C) to insure adequate demand in the secondary market. 
D) None of the above

Question 4

The week-end effect indicates that stocks tend to ___________ on Friday and ___________ on Monday.

Accepted Answer

A) decline; peak 
B) decline; decline 
C) peak; peak 
D) peak; decline 
A) decline; peak 
B) decline; decline 
C) peak; peak 
D) peak; decline

Question 5

Acceptance of the weak form of the EMH would indicate that charting can lead to profits.

Accepted Answer

A) True 
 B)False

Question 6

In the bull market of the 1990s, many firms repurchasing their own shares were among the strongest and most respected companies on Wall Street.

Accepted Answer

A) True 
 B)False

Question 7

Institutional investors often take advantage of the small firm effect.

Accepted Answer

A) True 
 B)False

Question 8

Besides management and prior performance, what primary factors should be considered by the investor in a new issue?

Accepted Answer

A) The intended use of funds from the issue 
B) Expected stock price in the secondary market 
C) The investment banker handling the distribution 
D) More than one of the above 
A) The intended use of funds from the issue 
B) Expected stock price in the secondary market 
C) The investment banker handling the distribution 
D) More than one of the above

Question 9

The weak form of the EMH is generally confirmed by research evidence.

Accepted Answer

A) True 
 B)False

Question 10

New stock issues are considered a special investment situation, because

Accepted Answer

A) they exhibit a very good long-term investment potential. 
B) the spread is greater than that in the secondary market. 
C) there is some evidence that new issues are under-priced. 
D) More than one of the above 
A) they exhibit a very good long-term investment potential. 
B) the spread is greater than that in the secondary market. 
C) there is some evidence that new issues are under-priced. 
D) More than one of the above

Question 11

Abnormal returns refer to gains beyond what the market would normally provide after adjustment for risk.

Accepted Answer

A) True 
 B)False

Question 12

Research indicates that stocks tend to peak in value on Friday and generally decline in value on Monday.

Accepted Answer

A) True 
 B)False

Question 13

A good reason for a stock repurchase is:

Accepted Answer

A) that management believes that the stock is undervalued in the market. 
B) so the company can escape the threat of a future merger or acquisition. 
C) to avoid obligations under an employee stock ownership plan. 
D) None of the above 
A) that management believes that the stock is undervalued in the market. 
B) so the company can escape the threat of a future merger or acquisition. 
C) to avoid obligations under an employee stock ownership plan. 
D) None of the above

Question 14

Anomalies related to the semi-strong form of the efficient market hypothesis indicate that:

Accepted Answer

A) the market is truly efficient. 
B) high returns are very difficult to achieve. 
C) the market is less than perfectly efficient. 
D) public information is almost useless. 
A) the market is truly efficient. 
B) high returns are very difficult to achieve. 
C) the market is less than perfectly efficient. 
D) public information is almost useless.

Question 15

Analysts generally are not influenced by accounting changes that have no economic consequences.

Accepted Answer

A) True 
 B)False

Question 16

The strong form of the efficient market hypothesis suggests that only insiders are able to show superior risk-adjusted returns.

Accepted Answer

A) True 
 B)False

Question 17

An investor in a new issue should be somewhat skeptical when the new funds are being used to buy out old stockholders or to acquire property from existing stockholders.

Accepted Answer

A) True 
 B)False

Question 18

All of the following are minimum listing requirements for a New York Stock Exchange listing except:

Accepted Answer

A) the market value of publicly held shares should be at least $100 million. 
B) there should be at least 2,000 round lot holders. 
C) there should be at least 1,200 employees. 
D) a total of at least 1,100,000 shares should be held publicly. 
A) the market value of publicly held shares should be at least $100 million. 
B) there should be at least 2,000 round lot holders. 
C) there should be at least 1,200 employees. 
D) a total of at least 1,100,000 shares should be held publicly.

Question 19

The semi-strong form of the efficient market hypothesis maintains that:

Accepted Answer

A) all public and private information is already impounded into the value of a security. 
B) there is no relationship between past and future prices. 
C) all public information is already impounded into the value of a security. 
D) insider information is immediately impounded into the value of a security. 
A) all public and private information is already impounded into the value of a security. 
B) there is no relationship between past and future prices. 
C) all public information is already impounded into the value of a security. 
D) insider information is immediately impounded into the value of a security.

Question 20

An unexpected earnings surprise refers to the situation where:

Accepted Answer

A) announced earnings were in line with analysts' favorable earnings expectations. 
B) announced earnings were better or worse than the analysts' forecast number. 
C) announced earnings were significantly below last year's earnings. 
D) the operating and financial leverage caused earnings to accelerate coming out of the trough of a business cycle. 
A) announced earnings were in line with analysts' favorable earnings expectations. 
B) announced earnings were better or worse than the analysts' forecast number. 
C) announced earnings were significantly below last year's earnings. 
D) the operating and financial leverage caused earnings to accelerate coming out of the trough of a business cycle.

Exam 9: Efficient Markets and Anomalies

Which of the following is NOT an advantage of listing a stock on an exchange?

The semi-strong form of the EMH is generally confirmed by research evidence, with some exceptions.

All of the following are reasons why an investment banker may under-price a new stock issue, except:

The week-end effect indicates that stocks tend to ___________ on Friday and ___________ on Monday.

Acceptance of the weak form of the EMH would indicate that charting can lead to profits.

In the bull market of the 1990s, many firms repurchasing their own shares were among the strongest and most respected companies on Wall Street.

Institutional investors often take advantage of the small firm effect.

Besides management and prior performance, what primary factors should be considered by the investor in a new issue?

The weak form of the EMH is generally confirmed by research evidence.

New stock issues are considered a special investment situation, because

Abnormal returns refer to gains beyond what the market would normally provide after adjustment for risk.

Research indicates that stocks tend to peak in value on Friday and generally decline in value on Monday.

A good reason for a stock repurchase is:

Anomalies related to the semi-strong form of the efficient market hypothesis indicate that:

Analysts generally are not influenced by accounting changes that have no economic consequences.

The strong form of the efficient market hypothesis suggests that only insiders are able to show superior risk-adjusted returns.

An investor in a new issue should be somewhat skeptical when the new funds are being used to buy out old stockholders or to acquire property from existing stockholders.

All of the following are minimum listing requirements for a New York Stock Exchange listing except:

The semi-strong form of the efficient market hypothesis maintains that:

An unexpected earnings surprise refers to the situation where:

The Investment Setting

Security Markets

Participating in the Market

Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts

Economic Activity

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

Behavioral Finance and Technical Analysis

Bond and Fixed-Income Fundamentals

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

International Securities Markets

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

A Comprehensive Analysis for Real Estate Investment Decisions

The Makeup of Institutional Investors

Filters

The week-end effect indicates that stocks tend to _ on Friday and _ on Monday.