Exam 8: Stock Price Behaviour and Market Efficiency

Delta Co. announced its merger plans on February 6 and had a daily return of 0.6 percent. Edwards Co. announced its merger plans on February 8 and had a daily return of 0.7 percent. Francis Co. announced its merger plans on February 7 and had a daily return of 0.4 percent. The daily market return for February 6^th through the 8^th was 0.2, 0.5, and -0.1, respectively. What is the combined cumulative abnormal return for the announcement date?

The Beta Company had a complete management changeover recently. Your finance professor is currently studying Beta's stock price for the two weeks prior to and the two weeks after the changeover to ascertain how the market reacted to the change in management. Your professor is conducting a(n):

A technical analyst teaches you a trading rule called a "Hoo-Yah." This strategy has produced a 15 percent annual return for the past five years, while the market return has been 12 percent. Which of the following is not true?

The Wayward Co. announced last week that their unpopular CEO resigned. In response to this announcement, Wayward's stock price increased from $18 a share to $23 a share and has remained constant at that level. This is an example of a(n):

If the market is semi-strong form efficient, then technical analysts __________ earn excess returns and fundamental analysts __________ earn excess returns.

The historical tendency of equity mutual funds to have a lower average return than the market may indicate the market is __________ form efficient.

Fair pricing of securities is a notion of.

In an efficient market, market timing tends to lead to:

Baker Drugs announced FDA approval for a new drug on August 3^rd. Treynor Co. announced FDA approval for their new drug on August 6. No other information was released around his time period. What is the combined cumulative abnormal return for the 5 day period commencing 2 days prior to the FDA approval announcement date? Use the following data to answer this question. Market \% Baker Drugs \% Treynor Co. \% 8/1 0.1\% 0.1\% 0.0 8/2 -0.4 -0.1 -0.5 8/3 0.3 0.9 0.2 8/6 0.1 0.5 0.8 8/7 -0.2 -0.4 0.3 8/8 0.1 -0.1 0.2 8/9 0.2 0.1 -0.1

The primary purpose of the NYSE circuit breakers is to:

With a clear relationship as a tipper and a tipee, buying or selling securities in an attempt to make profit is a(n) __________.

The return on a stock that remains after the overall market returns have been removed is called the __________ return

The tendency for Monday to have a negative return is the __________ effect.

In an efficient market, daily abnormal returns:

Which of the following is NOT one of the economics foundations of market efficiency?

List and discuss the three forms of market efficiency.

Run tests are used for investigating the weak form of market efficiency. How many runs are in the following sequence?

Small stocks tend to have the largest returns in __________.

Assume the market is semistrong-form efficient. The best investment strategy is to:

An inside trader is any person who __________ and then trades that company's stock without adhering to the Ontario Securities Commission (OSC) guidelines.