Stock Price Behavior And Market Efficiency

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Question 1

Free

Multiple Choice

Which one of the following states that investors cannot consistently earn positive excess returns?

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market return hypothesis

current market hypothesis

efficient market hypothesis

risk-return theory

excess theory

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Question 2

Free

Multiple Choice

Security A and Security B have similar risks.However,Security A has a higher rate of return than Security B.The return on Security A minus the return on Security B is referred to as which one of the following?

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market return

abnormal return

deviated return

excess return

real return

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Question 3

Free

Multiple Choice

Which one of the following terms is used to describe a stock price that moves over time creating no discernible pattern?

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deviated pattern

dispersed flow

efficient movement

overreaction and correction

random walk

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Question 4

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Multiple Choice

Which one of the following is a research method used to study the effects news has on stock prices?

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polarization

market analysis

event study

news theory

reaction hypothesis

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Question 5

Free

Multiple Choice

Which one of the following returns is computed as the observed return minus the expected return?

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visible

distinct

abnormal

subjective

efficient

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Question 6

Multiple Choice

Which type of trader is defined as one who decides to trade securities based on publicly available information and analysis?

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public

informed

normal

inside

block

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Question 7

Multiple Choice

Which one of the following terms best describes the information you know about a company that will have a significant effect on the price of the company's stock once that information is released?

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material public information

public information

abnormal information

private, non-material information

material non-public information

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Question 8

Multiple Choice

The day-of-the-week effect is defined as the tendency for which day of the week to have a negative average rate of return?

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Monday

Tuesday

Wednesday

Thursday

Friday

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Question 9

Multiple Choice

Which one of the following correctly identifies the phenomenon that states that one month has the greatest tendency for small stocks to earn large returns?

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January effect

March effect

September effect

October effect

December effect

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Question 10

Multiple Choice

Which one of the following terms is used to describe a market situation where prices are much higher than either fundamental or rational analysis would tend to support?

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bear market

cloud

inversion

bubble

crash aversion

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Question 11

Multiple Choice

Which one of the following terms is used to describe a sudden and significant collapse in market prices?

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dive

recession

crash

adjustment

rebound

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Question 12

Multiple Choice

Which one of the following terms is used to identify the NYSE rules which slow or stop trading when the DJIA declines by more than a specified amount during a trading session?

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order flows

market timers

crash helmets

circuit breakers

trade barriers

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Question 13

Multiple Choice

Which one of the following is required for a trader to earn excess profits?

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excessive trading

excessive research

market inefficiency

highly volatile market state

relatively stable market state

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Question 14

Multiple Choice

Stocks A,B,and C have identical risks.Stock A earns an annual return of 9.9 percent as compared to 9.6 percent returns on stocks B and C.Given this,you can correctly assume that:

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Stock A is overpriced.

the market return is 9.75 percent.

Stock A represents the smallest-sized firm.

Stock A has a positive excess return.

Stocks B and C represent firms that are in the process of merging.

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Question 15

Multiple Choice

In an efficient market,stocks with similar risks will:

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have the same market price.

pay similar dividends.

yield the market rate of return.

produce abnormal returns.

have similar rates of return.

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Question 16

Multiple Choice

Which one of the following will automatically occur if all investors are rational?

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All stock prices will be equal.

Equivalent risk assets will have equal expected rates of return.

All investors will earn the market rate of return.

All investors will earn the same rate of return.

The riskier an asset, the higher its market price will be.

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Question 17

Multiple Choice

Efficient markets tend to exist:

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only when all investors are rational.

anytime market volume exceeds the average trading volume.

only when market volatility is low.

when rational arbitrage traders dominate irrational traders.

when arbitrage trading is prohibited.

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Question 18

Multiple Choice

Independent deviations from rationality:

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only exist when the overall market is overvalued.

prevent the markets from ever being efficient.

can create an efficient market.

are the actions taken by rational arbitrage traders.

do not exist in an efficient market.

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Question 19

Multiple Choice

The term "independent deviations from rationality" implies that:

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irrational investors are absent from an efficient market.

arbitrage traders act independent of each other.

markets must be inefficient.

irrational investors behave differently from one another.

arbitrage traders act together to offset the actions of rational investors.

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Question 20

Multiple Choice

Arbitrage traders:

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tend to be well-capitalized.

tend to be irrational investors.

are dominated by irrational investors in an efficient market.

lower the efficiency level of a market.

sell only relatively inexpensive stocks.

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