Exam 12: Market Efficiency

A) Information is costless and widely available to market participants at approximately the same time.
B) Information is generated in a specific fashion such that announcements are basically dependent on each other.
C) There are a large number of rational,profit-maximizing investors who actively participate in the market.
D) Investors react quickly and fully to the new information,causing stock prices to adjust accordingly.

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A) over time are independent of one another.
B) changes over time are independent.
C) levels over time are independent.
D) changes today are dependent on yesterday's price changes.

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SUE (actual EPS - predicted E...

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A) Foreign securities tend to be more analyzed than U.S.securities.
B) Foreign markets tend to be less efficient than U.S.markets.
C) Foreign markets often lag behind U.S.markets as much as 6 months.
D) Foreign markets tend to be as efficient as U.S.markets.

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A) It makes information cheaper and more accessible thus making markets more efficient.
B) It is subject to new regulation thus marking markets less efficient.
C) It increases the volatility of security prices thus making markets less efficient.
D) It increases competition among brokers thus making markets more efficient.

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A) As much as 50% of small cap outperformance is associated with the January effect.
B) Small cap stocks underperform large cap stocks in recent years.
C) Small cap stock outperformance is a NASDAQ phenomenon,not NYSE.
D) Small cap stock outperformance is unaffected by micro-cap,commission,or liquidity (i.e.,bid-ask spread) concerns.

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A) normal return because the stock will be fairly priced when purchased.
B) extraordinary return because the new information will not affect the price until later.
C) extraordinary loss because insiders possess non-public information.
D) zero return because the next price is expected to be the same as the last price.

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A) weak form efficiency.
B) semi-strong form efficiency.
C) random walk efficiency.
D) strong form efficiency.

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A) The current price of a stock reflects all known information.
B) Investors will use all relevant data in making their decisions.
C) A perfect adjustment in price follows any new information.
D) Following any adjustment,the new price does not have to be the new equilibrium price.

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A) size effect
B) January effect
C) earnings announcement anomaly
D) accounting changes effect

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In a universe of all possible states of ...

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A) consistently outperform the buy-and-hold strategy.
B) minimize brokerage costs.
C) do not provide excess returns after all brokerage costs are deducted.
D) do provide excess returns to most investors who follow the rules faithfully.

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A) most overreactions occur within the first two days of an economic event.
B) investors are consistently risk-averse value maximizers.
C) the market is even more efficient than the weak-form EMH proposes.
D) investors sometimes act rationally.

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If the strong form EMH were valid,inside...

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