Question 1

Technical analysis is a popular technique used to predict stock prices by studying past stock price data and searching for patterns such as trends and regular cycles.

Accepted Answer

A) True 
 B)False

Question 2

A situation in which the price of an asset differs from its fundamental market value is called

Accepted Answer

A)  an unexploited profit opportunity.
B)  a bubble.
C)  a correction.
D)  a mean reversion.

Question 3

Another way to state the efficient market hypothesis is that in an efficient market,

Accepted Answer

A)  unexploited profit opportunities will never exist as market participants, such as arbitrageurs, ensure that they are instantaneously dissipated.
B)  unexploited profit opportunities will not exist for long, as market participants will act quickly to eliminate them.
C)  every financial market participant must be well informed about securities.
D)  only A and C of the above.

Question 4

Give evidence both for and against market efficiency.

Accepted Answer

The answer of Give evidence both for and against market...

Question 5

Which of the following is an insight from behavioral finance?

Accepted Answer

A)  The price of securities fully reflects all available information.
B)  Investor overconfidence leads to high trading volumes.
C)  The optimal forecast of a security's return equals the security's equilibrium return.
D)  Investment advisers cannot consistently beat the market.

Question 6

The evidence suggests technical analysts are not superior stock pickers.

Accepted Answer

A) True 
 B)False

Question 7

What is a rational bubble?

Accepted Answer

The answer of What is a rational bubble?...

Question 8

To say that stock prices follow a "random walk" is to argue that

Accepted Answer

A)  stock prices rise, then fall, then rise again.
B)  stock prices rise, then fall in a predictable fashion.
C)  stock prices tend to follow trends.
D)  stock prices cannot be predicted based on past trends.

Question 9

An important lesson from the Black Monday Crash of 1987 and the tech crash of 2000 is that

Accepted Answer

A)  factors other than market fundamentals affect stock prices.
B)  the strong version of the efficient market hypothesis, that stock prices reflect the true fundamental value of securities, is correct.
C)  market psychology has little if any effect on stock prices.
D)  there is no such thing as a rational bubble.

Question 10

Ivan Boesky, the most successful of the so-called arbs in the 1980s, was able to outperform the market on a consistent basis, indicating that

Accepted Answer

A)  securities markets are not efficient.
B)  unexploited profit opportunities were abundant.
C)  investors can outperform the market with inside information.
D)  only B and C of the above.

Question 11

An arrangement with a broker to borrow stocks from them and then sell it in the market, with the hope that they earn a profit by buying the stock back again after it has fallen in price is called

Accepted Answer

A)  behavioral finance.
B)  short sales.
C)  smart money.
D)  random walk.

Question 12

The elimination of a riskless profit opportunity in a market is called

Accepted Answer

A)  the efficient market hypothesis.
B)  random walk.
C)  arbitrage.
D)  market fundamentals.

Question 13

Rules used to predict movements in stock prices based on past patterns are, according to the efficient markets theory,

Accepted Answer

A)  a waste of time.
B)  profitably employed by all financial analysts.
C)  the most efficient rules to employ.
D)  consistent with the random walk hypothesis.

Question 14

Evidence in favor of market efficiency does not include

Accepted Answer

A)  random-walk behavior.
B)  technical analysis.
C)  performance of investment analysts and mutual funds.
D)  the January effect.

Question 15

The efficient market hypothesis suggests that allocating your funds in the financial markets on the advice of a financial analyst

Accepted Answer

A)  will certainly mean higher returns than if you had made selections by throwing darts at the financial page.
B)  will always mean lower returns than if you had made selections by throwing darts at the financial page.
C)  is not likely to prove superior to a strategy of making selections by throwing darts at the financial page.
D)  is good for the economy.

Question 16

In an efficient market, abnormal returns are not possible, even using inside information.

Accepted Answer

A) True 
 B)False

Question 17

Why are expectations important in understanding how financial instruments are valued?

Accepted Answer

Expectations play a crucial role in unde...

Question 18

According to the January effect, stock prices

Accepted Answer

A)  experience an abnormal price rise from December to January.
B)  experience an abnormal price decline from December to January.
C)  follow a random walk during January.
D)  set the pattern for the entire year in January.

Exam 6: Are Financial Markets Efficient

An arrangement with a broker to borrow stocks from them and then sell it in the market, with the hope that they earn a profit by buying the stock back again after it has fallen in price is called

Correct Answer
verified

Which of the following is an insight from behavioral finance?

Correct Answer
verified

The elimination of a riskless profit opportunity in a market is called

Correct Answer
verified

Ivan Boesky, the most successful of the so-called arbs in the 1980s, was able to outperform the market on a consistent basis, indicating that

Correct Answer
verified

The efficient market hypothesis suggests that allocating your funds in the financial markets on the advice of a financial analyst

Correct Answer
verified

Another way to state the efficient market hypothesis is that in an efficient market,

Correct Answer
verified

What is a rational bubble?

Correct Answer
verified

An important lesson from the Black Monday Crash of 1987 and the tech crash of 2000 is that

Correct Answer
verified

Technical analysis is a popular technique used to predict stock prices by studying past stock price data and searching for patterns such as trends and regular cycles.

Correct Answer
verified

To say that stock prices follow a "random walk" is to argue that

Correct Answer
verified

Why are expectations important in understanding how financial instruments are valued?

Correct Answer
Answered by ExamLex AI
Expectations play a crucial role in unde...
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The evidence suggests technical analysts are not superior stock pickers.

Correct Answer
verified

A situation in which the price of an asset differs from its fundamental market value is called

Correct Answer
verified

Evidence in favor of market efficiency does not include

Correct Answer
verified

Rules used to predict movements in stock prices based on past patterns are, according to the efficient markets theory,

Correct Answer
verified

In an efficient market, abnormal returns are not possible, even using inside information.

Correct Answer
verified

Give evidence both for and against market efficiency.

Correct Answer
verified

According to the January effect, stock prices

Correct Answer
verified

Exam 6: Are Financial Markets Efficient

An arrangement with a broker to borrow stocks from them and then sell it in the market, with the hope that they earn a profit by buying the stock back again after it has fallen in price is called

Correct AnswerverifiedShow Answer

Which of the following is an insight from behavioral finance?

Correct AnswerverifiedShow Answer

The elimination of a riskless profit opportunity in a market is called

Correct AnswerverifiedShow Answer

Ivan Boesky, the most successful of the so-called arbs in the 1980s, was able to outperform the market on a consistent basis, indicating that

Correct AnswerverifiedShow Answer

The efficient market hypothesis suggests that allocating your funds in the financial markets on the advice of a financial analyst

Correct AnswerverifiedShow Answer

Another way to state the efficient market hypothesis is that in an efficient market,

Correct AnswerverifiedShow Answer

What is a rational bubble?

Correct AnswerverifiedShow Answer

An important lesson from the Black Monday Crash of 1987 and the tech crash of 2000 is that

Correct AnswerverifiedShow Answer

Technical analysis is a popular technique used to predict stock prices by studying past stock price data and searching for patterns such as trends and regular cycles.

Correct AnswerverifiedShow Answer

To say that stock prices follow a "random walk" is to argue that

Correct AnswerverifiedShow Answer

Why are expectations important in understanding how financial instruments are valued?

Correct AnswerAnswered by ExamLex AIExpectations play a crucial role in unde...View AnswerShow Answer

The evidence suggests technical analysts are not superior stock pickers.

Correct AnswerverifiedShow Answer

A situation in which the price of an asset differs from its fundamental market value is called

Correct AnswerverifiedShow Answer

Evidence in favor of market efficiency does not include

Correct AnswerverifiedShow Answer

Rules used to predict movements in stock prices based on past patterns are, according to the efficient markets theory,

Correct AnswerverifiedShow Answer

In an efficient market, abnormal returns are not possible, even using inside information.

Correct AnswerverifiedShow Answer

Give evidence both for and against market efficiency.

Correct AnswerverifiedShow Answer

According to the January effect, stock prices

Correct AnswerverifiedShow Answer

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Correct Answer
Answered by ExamLex AI
Expectations play a crucial role in unde...
View Answer

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