Exam 8: The Efficient Market Hypothesis

Value stocks may provide investors with better returns than growth stocks if _______. I.value stocks are out of favor with investors II.prices of growth stocks include premiums for overly optimistic growth levels III.value stocks are likely to generate positive earnings surprises.

You are an investment manager who is currently managing assets worth $6 billion.You believe that active management of your fund could generate between an additional one tenth of 1% return on the portfolio.If you want to make sure your active strategy adds value,how much can you spend on security analysis?

According to results by Seyhun the main reason why investors cannot earn excess returns by following inside trades after they become public is ______________.

A day trade with an average stock holding period of under 8 minutes might be most closely associated with which trading philosophy?

Stock market analysts have tended to be ___________ in their recommendations to investors.

A market anomaly refers to _______.

If the daily returns on the stock market are normally distributed with a mean of 0.05% and a standard deviation of 1.00%,the probability that the stock market would have a return of -23.00% or worse on one particular day (as it did on Black Monday)is approximately __________.

In a 1953 study of stock prices,Maurice Kendall found that ________.

Growth stocks usually exhibit ___ price-to-book ratios and ___ price-to-earnings ratios.

Insiders are able to profitably trade and earn abnormal returns prior to the announcement of positive news.This is a violation of which form of efficiency?

Studies show that the bid-ask spread for the least liquid stocks may be as high as ______.

Which of the following statements is/are correct?

When stock returns exhibit positive serial correlation,this means that __________ returns tend to follow ___________ returns.

In an efficient market and for an investor that believes in a passive approach to investing,what is the primary duty of a portfolio manager?

Fama and French (1991)and Reinganum (1988)found that firms with __________ market/book ratios had higher stock returns.

Fundamental analysis is likely to yield best results for _______.

Which of the following would violate the efficient market hypothesis?

Which of the following contradicts the proposition that the stock market is weakly efficient?

"Active investment management may generate additional returns at times of about 0.1%.However,the standard deviation of the typical well diversified portfolio is about 20%,so it is very difficult to statistically identify any increase in performance." Even if true,this statement is an example of the _________ problem in deciding how efficient the markets are.

The tendency of poorly performing stocks and well performing stocks in one period to continue their performance into the next period is called the ________________.