quiz-ch13 - Questions in [New Questions] 1) Whether or not...

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Sheet1 Page 1 Questions in [New Questions] 1) Whether or not markets are efficient has implications for: I. individual investors. II. security-issuing firms. III. professional traders. IV. market regulators. [ ] I and III only [ ] II and IV only [ ] I, II, and III only [ ] II, III, and IV only v [ ] I, II, III, and IV 2) The efficient market hypothesis (EMH) suggests that: [ ] it takes between one and two hours for new information to be reflected in stock prices. [ ] investors should expect to earn less than normal rates of return over the long-term. [ ] a graph of stock prices will look like rounded hills and valleys. v [ ] stock prices adjust before individual investors can respond to news announcements. [ ] investors can be fooled over the short-term. 3) Which form(s) of market efficiency is (are) generally considered to exist in well-organized capital markets? I. strong form efficiency II. semistrong form efficiency III. weak form efficiency [ ] I only [ ] II only [ ] III only [ ] I and II only v [ ] II and III only 4) Which one of the following tends to indicate an efficient market given a single release of new information? [ ] a delayed response [ ] a price bubble v [ ] a one-time price adjustment [ ] a series of price adjustments of diminishing intensity [ ] a price reversion 5) Which one of the following pricing patterns reflects an overreaction and reversion in an inefficient stock market? Assume th e [ ] $20, $23, $24, $25, $25, $25 v [ ] $20, $25, $24, $23, $23, $23 [ ] $20, $20, $20, $23, $23, $23 [ ] $20, $18, $18, $18, $18, $18 [ ] $20, $20, $20, $22, $22, $22 6) Academics who study stock prices have: v [ ] found examples of obvious mispricing in the financial markets over multi-day periods. [ ] found examples of obvious mispricing in the financial markets but only within a trading day. [ ] determined that any stock mispricing exists only long enough for arbitrage trades to be executed. [ ] concluded that mispricing does not occur but the impression that mispricing does occur is frequently observed. [ ] concluded the mispricing does not occur and knowledgeable investors only expect to earn normal profits. 7) Behavioral finance suggests that:
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Sheet1 Page 2 [ ] almost all investors tend to hold adequately diversified portfolios. [ ] almost all investors trade less frequently than they probably should. [ ] almost all investors succeed in minimizing their tax liability related to their investing activities. [ ] short-term risk increases the size of arbitrage transactions. v [ ] the efficient capital market theory might not define the actual marketplace. 8) The concepts of behavioral finance: [ ] argue that arbitrage ensures that the capital markets are strong form efficient. [ ] include the argument that the irrational actions of investors cancel each other out.
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This note was uploaded on 06/15/2008 for the course ACC 501 504 taught by Professor Na during the Spring '08 term at University of Texas at Austin.

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quiz-ch13 - Questions in [New Questions] 1) Whether or not...

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