Question 1

An abnormal return is calculated as:

Accepted Answer

A)  expected return less risk-free rate 
B)  expected return less market return 
C)  actual return less market return 
D)  actual return less expected return 
A)  expected return less risk-free rate 
B)  expected return less market return 
C)  actual return less market return 
D)  actual return less expected return

Question 2

Lakonishok,Shleifer and Vishny (1994)provide arguments why fund managers will avoid:

Accepted Answer

A)  value shares 
B)  growth shares 
C)  glamorous shares 
D)  all of these choices 
A)  value shares 
B)  growth shares 
C)  glamorous shares 
D)  all of these choices

Question 3

The weak form efficiency states that all past information,including security price and volume data,must be reflected in the current stock price.

Accepted Answer

A) True 
 B)False

Question 4

Prospect theory provides an explanation for why individuals tend to

Accepted Answer

A)  hold on to their investments for too long 
B)  sell their investments too quickly 
C)  sell their investments under value 
D)  none of these choices 
A)  hold on to their investments for too long 
B)  sell their investments too quickly 
C)  sell their investments under value 
D)  none of these choices

Question 5

Growth shares are those firms that are expected to grow at a faster rate than:

Accepted Answer

A)  value shares 
B)  speculative shares 
C)  glamorous shares 
D)  the market 
A)  value shares 
B)  speculative shares 
C)  glamorous shares 
D)  the market

Question 6

Which of the following beliefs would not preclude charting as a method of portfolio management?

Accepted Answer

A) The market is strong form efficient. 
B) The market is semi-strong form efficient. 
C) The market is weak form efficient. 
D) Stock prices follow recurring patterns. 
A) The market is strong form efficient. 
B) The market is semi-strong form efficient. 
C) The market is weak form efficient. 
D) Stock prices follow recurring patterns.

Question 7

Economy wide announcements such as those about money supply tend to create a large amount of market reaction.

Accepted Answer

A) True 
 B)False

Question 8

The study by Brailsford and Faff (1993)shows that the All-Ordinaries Index exhibits autocorrelation in the order of:

Accepted Answer

A)  $ 0.1 $ 
B)  $ 0.2 $ 
C)  $ 0.5 $ 
D)  $ -0.2 $ 
A)  $ 0.1 $ 
B)  $ 0.2 $ 
C)  $ 0.5 $ 
D)  $ -0.2 $

Question 9

The hypothesis that argues that there is a downward price pressure at the end of the tax year on shares that have experienced recent price declines as investors attempt to sell in order to realise capital losses is the:

Accepted Answer

A)  tax-loss selling hypothesis 
B)  tax on capital gains hypothesis 
C)  price rebound hypothesis 
D)  share price declines hypothesis 
A)  tax-loss selling hypothesis 
B)  tax on capital gains hypothesis 
C)  price rebound hypothesis 
D)  share price declines hypothesis

Question 10

The production of _____ is more likely to be greater during trading periods.

Accepted Answer

A)  private information 
B)  public information 
C)  private and public information 
D)  neither private nor public information 
A)  private information 
B)  public information 
C)  private and public information 
D)  neither private nor public information

Question 11

Beedles,Dodd and Officer (1988)find that Australian small firms have risk-adjusted returns of around 8% p.a.

Accepted Answer

A) True 
 B)False

Question 12

Trading on the NYSE is halted for one hour if the Dow Jones Index falls by:

Accepted Answer

A)  150 points 
B)  200 points 
C)  250 points 
D)  400 points 
A)  150 points 
B)  200 points 
C)  250 points 
D)  400 points

Question 13

Returns in the Australian market are on average positive in which of the following months?

Accepted Answer

A)  January 
B)  July 
C)  December 
D)  all of these choices 
A)  January 
B)  July 
C)  December 
D)  all of these choices

Question 14

According to the semi-strong form efficient: ____________.

Accepted Answer

A) stock prices do not rapidly adjust to new information 
B) future changes in stock prices cannot be predicted from any information that is publicly available 
C) corporate insiders should have no better investment performance than other investors even if allowed to trade freely 
D) arbitrage between futures and cash markets should not produce extraordinary profits 
A) stock prices do not rapidly adjust to new information 
B) future changes in stock prices cannot be predicted from any information that is publicly available 
C) corporate insiders should have no better investment performance than other investors even if allowed to trade freely 
D) arbitrage between futures and cash markets should not produce extraordinary profits

Question 15

Loyalists believe that the long-term patterns in returns are induced by institutional and/or research method problems such that the patterns are artificial and therefore not exploitable.Examples are:

Accepted Answer

A)  changes in risk that are not accounted for when estimating abnormal returns 
B)  differences in firm size 
C)  problems in correctly estimating beta risk over different return intervals 
D)  all of these choices 
A)  changes in risk that are not accounted for when estimating abnormal returns 
B)  differences in firm size 
C)  problems in correctly estimating beta risk over different return intervals 
D)  all of these choices

Question 16

Bowman and Buchanan (1995)argue that there are two sets of forces at work that operate as impediments to the acceptance of efficient markets.These are:

Accepted Answer

A)  market structure forces and behavioural forces 
B)  market structure forces and industry structure forces 
C)  market structure forces and international market structure forces 
D)  none of these choices 
A)  market structure forces and behavioural forces 
B)  market structure forces and industry structure forces 
C)  market structure forces and international market structure forces 
D)  none of these choices

Question 17

Random price movements indicate ________.

Accepted Answer

A) irrational markets 
B) that prices cannot equal fundamental values 
C) that technical analysis to uncover trends can be quite useful 
D) that markets are functioning efficiently 
A) irrational markets 
B) that prices cannot equal fundamental values 
C) that technical analysis to uncover trends can be quite useful 
D) that markets are functioning efficiently

Question 18

According to Black (1986),informed traders are most unlikely to trade on 'noise'.

Accepted Answer

A) True 
 B)False

Question 19

Efficiency predicts that when markets reach a peak there will often be a 'realignment' or 'market correction'.

Accepted Answer

A) True 
 B)False

Question 20

Banz (1981)has evidenced a trading strategy in the USA that can earn risk-adjusted profits of around 20% by taking:

Accepted Answer

A)  long positions in a portfolio of large firms and short positions in a portfolio of small firms 
B)  short positions in a portfolio of large firms and long positions in a portfolio of small firms 
C)  short positions in a portfolio of small firms and long positions in a portfolio of large firms 
D)  long positions in a portfolio of small firms and short positions in a portfolio of large firms 
A)  long positions in a portfolio of large firms and short positions in a portfolio of small firms 
B)  short positions in a portfolio of large firms and long positions in a portfolio of small firms 
C)  short positions in a portfolio of small firms and long positions in a portfolio of large firms 
D)  long positions in a portfolio of small firms and short positions in a portfolio of large firms

An abnormal return is calculated as:

Lakonishok,Shleifer and Vishny (1994)provide arguments why fund managers will avoid:

The weak form efficiency states that all past information,including security price and volume data,must be reflected in the current stock price.

Prospect theory provides an explanation for why individuals tend to

Growth shares are those firms that are expected to grow at a faster rate than:

Which of the following beliefs would not preclude charting as a method of portfolio management?

Economy wide announcements such as those about money supply tend to create a large amount of market reaction.

The study by Brailsford and Faff (1993)shows that the All-Ordinaries Index exhibits autocorrelation in the order of:

The hypothesis that argues that there is a downward price pressure at the end of the tax year on shares that have experienced recent price declines as investors attempt to sell in order to realise capital losses is the:

The production of _____ is more likely to be greater during trading periods.

Beedles,Dodd and Officer (1988)find that Australian small firms have risk-adjusted returns of around 8% p.a.

Trading on the NYSE is halted for one hour if the Dow Jones Index falls by:

Returns in the Australian market are on average positive in which of the following months?

According to the semi-strong form efficient: ____________.

Loyalists believe that the long-term patterns in returns are induced by institutional and/or research method problems such that the patterns are artificial and therefore not exploitable.Examples are:

Bowman and Buchanan (1995)argue that there are two sets of forces at work that operate as impediments to the acceptance of efficient markets.These are:

Random price movements indicate ________.

According to Black (1986),informed traders are most unlikely to trade on 'noise'.

Efficiency predicts that when markets reach a peak there will often be a 'realignment' or 'market correction'.

Banz (1981)has evidenced a trading strategy in the USA that can earn risk-adjusted profits of around 20% by taking:

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Money Market Securities

Bonds

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Futures and Forward Contracts

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters

Exam 10: Concepts and Applications of Market Efficiency

An abnormal return is calculated as:

Lakonishok,Shleifer and Vishny (1994)provide arguments why fund managers will avoid:

The weak form efficiency states that all past information,including security price and volume data,must be reflected in the current stock price.

Prospect theory provides an explanation for why individuals tend to

Growth shares are those firms that are expected to grow at a faster rate than:

Which of the following beliefs would not preclude charting as a method of portfolio management?

Economy wide announcements such as those about money supply tend to create a large amount of market reaction.

The study by Brailsford and Faff (1993)shows that the All-Ordinaries Index exhibits autocorrelation in the order of:

The hypothesis that argues that there is a downward price pressure at the end of the tax year on shares that have experienced recent price declines as investors attempt to sell in order to realise capital losses is the:

The production of _____ is more likely to be greater during trading periods.

Beedles,Dodd and Officer (1988)find that Australian small firms have risk-adjusted returns of around 8% p.a.

Trading on the NYSE is halted for one hour if the Dow Jones Index falls by:

Returns in the Australian market are on average positive in which of the following months?

According to the semi-strong form efficient: ____________.

Loyalists believe that the long-term patterns in returns are induced by institutional and/or research method problems such that the patterns are artificial and therefore not exploitable.Examples are:

Bowman and Buchanan (1995)argue that there are two sets of forces at work that operate as impediments to the acceptance of efficient markets.These are:

Random price movements indicate ________.

According to Black (1986),informed traders are most unlikely to trade on 'noise'.

Efficiency predicts that when markets reach a peak there will often be a 'realignment' or 'market correction'.

Banz (1981)has evidenced a trading strategy in the USA that can earn risk-adjusted profits of around 20% by taking:

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Money Market Securities

Bonds

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Futures and Forward Contracts

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters