Question 1

A sudden and significant decline in overall market prices is called a(n)

Accepted Answer

A)  Crash 
B)  Dive 
C)  Recession 
D)  Rebound 
E)  Adjustment 
A)  Crash 
B)  Dive 
C)  Recession 
D)  Rebound 
E)  Adjustment

Question 2

If the market is efficient only in regard to past prices, the market is said to be __________ efficient.

Accepted Answer

A)  mild-form 
B)  weak-form 
C)  historical-form 
D)  semi-strong form 
E)  strong-form 
A)  mild-form 
B)  weak-form 
C)  historical-form 
D)  semi-strong form 
E)  strong-form

Question 3

You examine financial statements of companies and determine that if the ROE of a company the previous year increases, the stock will have an excess return this year. This would indicate that the market is __________ -form efficient.

Accepted Answer

A)  weak 
B)  semistrong 
C)  not semistrong 
D)  strong 
E)  not weak 
A)  weak 
B)  semistrong 
C)  not semistrong 
D)  strong 
E)  not weak

Question 4

Which one of the following best describes the current understanding of market efficiency?

Accepted Answer

A)  short-term stock price movements are easy to predict 
B)  markets overreact to unanticipated events in a manner which can be used to earn excess returns 
C)  the market appears to be highly inefficient 
D)  short-term market movements are difficult, if not impossible, to predict accurately 
E)  markets tend to react slowly to unanticipated announcements 
A)  short-term stock price movements are easy to predict 
B)  markets overreact to unanticipated events in a manner which can be used to earn excess returns 
C)  the market appears to be highly inefficient 
D)  short-term market movements are difficult, if not impossible, to predict accurately 
E)  markets tend to react slowly to unanticipated announcements

Question 5

If the market is semistrong-form efficient is it also weak form efficient?
 If the market is weak-form efficient is it also semistrong-form efficient?

Accepted Answer

This examines the student's knowledge co

Question 6

When market prices are much higher than fundamental or rational analysis would tend to support, the market is said to be in a(n):

Accepted Answer

A)  Fantasy land 
B)  Cloud 
C)  Inverted state 
D)  Bubble 
E)  Winner's state 
A)  Fantasy land 
B)  Cloud 
C)  Inverted state 
D)  Bubble 
E)  Winner's state

Question 7

In an efficient market, stocks with similar risks will:

Accepted Answer

A)  have the same market price. 
B)  pay similar dividends. 
C)  yield the market rate of return. 
D)  produce abnormal returns. 
E)  have similar rates of return. 
A)  have the same market price. 
B)  pay similar dividends. 
C)  yield the market rate of return. 
D)  produce abnormal returns. 
E)  have similar rates of return.

Question 8

If the DJIA falls by 20 percent, the NYSE will:

Accepted Answer

A)  stop trading for one hour. 
B)  stop trading for two hours if the decline occurs before 1 P.M. 
C)  stop trading for two hours. 
D)  stop trading for one hour if the decline occurs after 12 P.M. 
E)  cease trading for the day. 
A)  stop trading for one hour. 
B)  stop trading for two hours if the decline occurs before 1 P.M. 
C)  stop trading for two hours. 
D)  stop trading for one hour if the decline occurs after 12 P.M. 
E)  cease trading for the day.

Question 9

Arbitrage traders

Accepted Answer

A)  Can only function in efficient markets 
B)  Tend to be irrational investors 
C)  Is a term applied to all investors who buy stock and resell it at a higher price 
D)  Make the market more efficient 
E)  Trade only those securities that are under-priced 
A)  Can only function in efficient markets 
B)  Tend to be irrational investors 
C)  Is a term applied to all investors who buy stock and resell it at a higher price 
D)  Make the market more efficient 
E)  Trade only those securities that are under-priced

Question 10

A(n) __________ is a method of research that studies the effect that news announcements have on stock prices.

Accepted Answer

A)  Event study 
B)  Efficient hypothesis 
C)  Random walk 
D)  Market watch 
E)  Pure play 
A)  Event study 
B)  Efficient hypothesis 
C)  Random walk 
D)  Market watch 
E)  Pure play

Question 11

Discoveries of buying shares of stock at the closing price on a given day and selling them before noon on the following day, you can generate an excess return.

Accepted Answer

A)  This is a violation of weak-form market efficiency 
B)  This is a violation of semi-weak-form market efficiency 
C)  This is a violation of semistrong-form market efficiency 
D)  This is a violation of strong-form market efficiency 
E)  This does not violate market efficiency. 
A)  This is a violation of weak-form market efficiency 
B)  This is a violation of semi-weak-form market efficiency 
C)  This is a violation of semistrong-form market efficiency 
D)  This is a violation of strong-form market efficiency 
E)  This does not violate market efficiency.

Question 12

A market in which past prices and volume are of no use in beating the market is __________ -form efficient

Accepted Answer

A)  weak 
B)  semi-weak 
C)  semistrong 
D)  strong 
E)  technical 
A)  weak 
B)  semi-weak 
C)  semistrong 
D)  strong 
E)  technical

Question 13

The first time the DJIA fell by more than 100 points on a single day was:

Accepted Answer

A)  October 29, 1929. 
B)  October 16, 1987. 
C)  October 19, 1987. 
D)  October 20, 1987. 
E)  December 16, 1990. 
A)  October 29, 1929. 
B)  October 16, 1987. 
C)  October 19, 1987. 
D)  October 20, 1987. 
E)  December 16, 1990.

Question 14

Which one of the following statements describes an investment strategy that may lead to profitable results based on current research findings?

Accepted Answer

A)  selling stocks as soon as positive earnings surprises are announced 
B)  selling stocks on Mondays only 
C)  selling small-company stocks in December and repurchasing them in February 
D)  selling stocks on the 25th of the month and repurchasing them on the 5th of the following month 
E)  buying stocks with relatively low P/E ratios 
A)  selling stocks as soon as positive earnings surprises are announced 
B)  selling stocks on Mondays only 
C)  selling small-company stocks in December and repurchasing them in February 
D)  selling stocks on the 25th of the month and repurchasing them on the 5th of the following month 
E)  buying stocks with relatively low P/E ratios

Question 15

A method of investigating the __________ -form of market efficiency is via a __________ test.

Accepted Answer

A)  Weak; event study 
B)  Semi-weak; psychological 
C)  Weak; run 
D)  Semi-strong; autocorrelation 
E)  Strong; subjective 
A)  Weak; event study 
B)  Semi-weak; psychological 
C)  Weak; run 
D)  Semi-strong; autocorrelation 
E)  Strong; subjective

Question 16

If the financial markets are efficient, then:

Accepted Answer

A)  your investment return is highly dependent upon your security selection. 
B)  holding a diversified, low-cost, passively-managed portfolio is probably your best investment strategy. 
C)  you should adopt an investment strategy based on market timing. 
D)  having a professional manager who actively trades your portfolio is most likely your best 
E)  you should hire a professional money manager, regardless of the cost to do so. 
A)  your investment return is highly dependent upon your security selection. 
B)  holding a diversified, low-cost, passively-managed portfolio is probably your best investment strategy. 
C)  you should adopt an investment strategy based on market timing. 
D)  having a professional manager who actively trades your portfolio is most likely your best 
E)  you should hire a professional money manager, regardless of the cost to do so.

Question 17

Tests regarding stock splits or dividends are usually tests of the __________ form of market efficiency.

Accepted Answer

A)  Weak 
B)  Semi-strong 
C)  Strong 
D)  Semi-efficient 
E)  none of the above. 
A)  Weak 
B)  Semi-strong 
C)  Strong 
D)  Semi-efficient 
E)  none of the above.

Question 18

In reality, market prices tend to __________ earnings "surprises".

Accepted Answer

A)  adjust quickly and efficiently to 
B)  overreact and then correct in response to 
C)  overreact and never correct in response to 
D)  ignore 
E)  adjust slowly to 
A)  adjust quickly and efficiently to 
B)  overreact and then correct in response to 
C)  overreact and never correct in response to 
D)  ignore 
E)  adjust slowly to

Question 19

Which one of the following is most apt to be considered insider trading?

Accepted Answer

A)  Stu overhears Martha say that she is being promoted to sales manager. 
B)  Cathy compiles the financial statements and knows that net income for the latest quarter is significantly below analyst's forecasts. 
C)  Wes is an outside auditor and has found what he believes are significant accounting irregularities in a company's financial reports. 
D)  Theresa buys stock in ABC after she overhears a conversation between the firm's president and his wife concerning a proposed acquisition. 
E)  Lester buys shares of stock in his firm through his company retirement plan on a regular monthly basis. 
A)  Stu overhears Martha say that she is being promoted to sales manager. 
B)  Cathy compiles the financial statements and knows that net income for the latest quarter is significantly below analyst's forecasts. 
C)  Wes is an outside auditor and has found what he believes are significant accounting irregularities in a company's financial reports. 
D)  Theresa buys stock in ABC after she overhears a conversation between the firm's president and his wife concerning a proposed acquisition. 
E)  Lester buys shares of stock in his firm through his company retirement plan on a regular monthly basis.

Question 20

The dot.com bubble affected __________ stocks.

Accepted Answer

A)  only technology 
B)  only computer 
C)  only internet-related 
D)  only small-company 
E)  both large and small-company 
A)  only technology 
B)  only computer 
C)  only internet-related 
D)  only small-company 
E)  both large and small-company

A sudden and significant decline in overall market prices is called a(n)

If the market is efficient only in regard to past prices, the market is said to be __________ efficient.

You examine financial statements of companies and determine that if the ROE of a company the previous year increases, the stock will have an excess return this year. This would indicate that the market is __________ -form efficient.

Which one of the following best describes the current understanding of market efficiency?

If the market is semistrong-form efficient is it also weak form efficient? If the market is weak-form efficient is it also semistrong-form efficient?

When market prices are much higher than fundamental or rational analysis would tend to support, the market is said to be in a(n):

In an efficient market, stocks with similar risks will:

If the DJIA falls by 20 percent, the NYSE will:

Arbitrage traders

A(n) __________ is a method of research that studies the effect that news announcements have on stock prices.

Discoveries of buying shares of stock at the closing price on a given day and selling them before noon on the following day, you can generate an excess return.

A market in which past prices and volume are of no use in beating the market is __________ -form efficient

The first time the DJIA fell by more than 100 points on a single day was:

Which one of the following statements describes an investment strategy that may lead to profitable results based on current research findings?

A method of investigating the -form of market efficiency is via a test.

If the financial markets are efficient, then:

Tests regarding stock splits or dividends are usually tests of the __________ form of market efficiency.

In reality, market prices tend to __________ earnings "surprises".

Which one of the following is most apt to be considered insider trading?

The dot.com bubble affected __________ stocks.

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Exam 8: Stock Price Behaviour and Market Efficiency

A sudden and significant decline in overall market prices is called a(n)

If the market is efficient only in regard to past prices, the market is said to be __________ efficient.

You examine financial statements of companies and determine that if the ROE of a company the previous year increases, the stock will have an excess return this year. This would indicate that the market is __________ -form efficient.

Which one of the following best describes the current understanding of market efficiency?

If the market is semistrong-form efficient is it also weak form efficient? If the market is weak-form efficient is it also semistrong-form efficient?

When market prices are much higher than fundamental or rational analysis would tend to support, the market is said to be in a(n):

In an efficient market, stocks with similar risks will:

If the DJIA falls by 20 percent, the NYSE will:

Arbitrage traders

A(n) __________ is a method of research that studies the effect that news announcements have on stock prices.

Discoveries of buying shares of stock at the closing price on a given day and selling them before noon on the following day, you can generate an excess return.

A market in which past prices and volume are of no use in beating the market is __________ -form efficient

The first time the DJIA fell by more than 100 points on a single day was:

Which one of the following statements describes an investment strategy that may lead to profitable results based on current research findings?

A method of investigating the __________ -form of market efficiency is via a __________ test.

If the financial markets are efficient, then:

Tests regarding stock splits or dividends are usually tests of the __________ form of market efficiency.

In reality, market prices tend to __________ earnings "surprises".

Which one of the following is most apt to be considered insider trading?

The dot.com bubble affected __________ stocks.

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

A method of investigating the -form of market efficiency is via a test.