Exam 11: The Efficient Market Hypothesis

Matthews Corporation has a beta of 1.2. The annualized market return yesterday was 13%, and the risk-free rate is currently 5%. You observe that Matthews had an annualized return yesterday of 17%. Assuming that markets are efficient, this suggests that

Patell and Woflson (1984) report that most of the stock-price response to corporate dividend or earnings announcements occurs within ____________ of the announcement.

The weather report says that a devastating and unexpected freeze is expected to hit Florida tonight during the peak of the citrus harvest. In an efficient market, one would expect the price of Florida Orange's stock to

QQAG just announced yesterday that its fourth quarter earnings will be 35% higher than last year's fourth quarter. You observe that QQAG had an abnormal return of 1.7% yesterday. This suggests that

The stock market follows a

Studies of stock price reactions to news are called

If you believe in the reversal effect, you should

Proponents of the EMH think technical analysts

Studies of positive earnings surprises have shown that there is

Nicholas Manufacturing just announced yesterday that its fourth quarter earnings will be 10% higher than last year's fourth quarter. Nicholas had an abnormal return of 1.2% yesterday. This suggests that

Your professor finds a stock-trading rule that generates excess risk-adjusted returns. Instead of publishing the results, she keeps the trading rule to herself. This is most closely associated with

Proponents of the EMH typically advocate

Basu (1977, 1983) found that firms with high P/E ratios

_________ above which it is difficult for the market to rise.

Which of the following are used by fundamental analysts to determine proper stock prices? I) Trendlines II) Earnings III. Dividend prospects IV. Expectations of future interest rates V. Resistance levels

If you believe in the _________ form of the EMH, you believe that stock prices reflect all available information, including information that is available only to insiders.

Del Guerico and Reuter (2014) report that the average underperformance of actively-managed mutual funds is driven largely by

In an efficient market,

__________ focus more on past price movements of a firm's stock than on the underlying determinants of future profitability.

A support level is the price range at which a technical analyst would expect the