Question 1

From the end of 1989 to the spring of 2003,the Nikkei Index declined in value approximately _____ percent.

Accepted Answer

A) 50 
B) 60 
C) 70 
D) 80 
E) 90 
A) 50 
B) 60 
C) 70 
D) 80 
E) 90 D

Question 2

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

Accepted Answer

A) All stock prices will be equal. 
B) Equivalent risk assets will have equal expected rates of return. 
C) All investors will earn the market rate of return. 
D) All investors will earn the same rate of return. 
E) The riskier an asset, the higher its market price will be. 
A) All stock prices will be equal. 
B) Equivalent risk assets will have equal expected rates of return. 
C) All investors will earn the market rate of return. 
D) All investors will earn the same rate of return. 
E) The riskier an asset, the higher its market price will be. B

Question 3

Which of the following factors contributed to the Crash of 1987?
I.irrational investors
II.program trading
III.panic selling
IV.price uncertainty

Accepted Answer

A) II and IV only 
B) I, II, and III only 
C) I, II, and IV only 
D) II, III, and IV only 
E) I, II, III, and IV 
A) II and IV only 
B) I, II, and III only 
C) I, II, and IV only 
D) II, III, and IV only 
E) I, II, III, and IV E

Question 4

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

Accepted Answer

A) market return hypothesis 
B) current market hypothesis 
C) efficient market hypothesis 
D) risk-return theory 
E) excess theory 
A) market return hypothesis 
B) current market hypothesis 
C) efficient market hypothesis 
D) risk-return theory 
E) excess theory

Question 5

Efficient markets tend to exist:

Accepted Answer

A) only when all investors are rational. 
B) anytime market volume exceeds the average trading volume. 
C) only when market volatility is low. 
D) when rational arbitrage traders dominate irrational traders. 
E) when arbitrage trading is prohibited. 
A) only when all investors are rational. 
B) anytime market volume exceeds the average trading volume. 
C) only when market volatility is low. 
D) when rational arbitrage traders dominate irrational traders. 
E) when arbitrage trading is prohibited.

Question 6

A trader was found guilty of violating insider trading laws.As part of his sentencing,he had to forfeit the excessive profits earned on the illegal trades.What does this conviction indicate about the current form of market efficiency?

Accepted Answer

The conviction of a trader for violating

Question 7

The day-of-the-week effect refers to which trading day?

Accepted Answer

A) Monday 
B) Tuesday 
C) Wednesday 
D) Thursday 
E) Friday 
A) Monday 
B) Tuesday 
C) Wednesday 
D) Thursday 
E) Friday

Question 8

The value of the Amex Internet Index increased by about _____ percent from October 1998 to March 2000 and subsequently declined by about _____ percent by October 2002.

Accepted Answer

A) 100; 50 
B) 200; 75 
C) 400; 80 
D) 500; 90 
E) 600; 80 
A) 100; 50 
B) 200; 75 
C) 400; 80 
D) 500; 90 
E) 600; 80

Question 9

The January effect:

Accepted Answer

A) does not occur in the domestic market every year. 
B) occurs every year but only for large-company stocks. 
C) occurs every year but only for small-company stocks. 
D) is unaffected by institutional investors. 
E) is unique to the United States. 
A) does not occur in the domestic market every year. 
B) occurs every year but only for large-company stocks. 
C) occurs every year but only for small-company stocks. 
D) is unaffected by institutional investors. 
E) is unique to the United States.

Question 10

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

Accepted Answer

A) visible 
B) distinct 
C) abnormal 
D) subjective 
E) efficient 
A) visible 
B) distinct 
C) abnormal 
D) subjective 
E) efficient

Question 11

The primary purpose of the NYSE circuit breakers is to:

Accepted Answer

A) halt short selling. 
B) encourage program trading. 
C) limit trading by specialists. 
D) minimize institutional trading. 
E) slow a market decline. 
A) halt short selling. 
B) encourage program trading. 
C) limit trading by specialists. 
D) minimize institutional trading. 
E) slow a market decline.

Question 12

Which one of the following items is most apt to be considered material non-public information? Assume that none of this information is known publicly.

Accepted Answer

A) Barb knows that Sue, an accounting clerk, is planning on resigning on Friday. 
B) Linda knows a new receptionist has just been hired. 
C) Wendy knows that her firm's net income is continuing to increase at a steady rate. 
D) Tracey knows her employer just received patent approval on a key new product. 
E) Maria is the chief financial officer and knows the firm intends to maintain its current dividend policy. 
A) Barb knows that Sue, an accounting clerk, is planning on resigning on Friday. 
B) Linda knows a new receptionist has just been hired. 
C) Wendy knows that her firm's net income is continuing to increase at a steady rate. 
D) Tracey knows her employer just received patent approval on a key new product. 
E) Maria is the chief financial officer and knows the firm intends to maintain its current dividend policy.

Question 13

Which of the following are ineffective strategies for producing excess returns if the market is semistrong-form efficient?
I.graphing past prices searching for patterns
II.watching the daily market movements
III.studying the latest analyst's reports
IV.analyzing a firm's financial statements

Accepted Answer

A) I and III only 
B) I and IV only 
C) I, II, and III only 
D) II, III, and IV only 
E) I, II, III, and IV 
A) I and III only 
B) I and IV only 
C) I, II, and III only 
D) II, III, and IV only 
E) I, II, III, and IV

Question 14

Market prices tend to _____ earnings "surprises".

Accepted Answer

A) adjust quickly and efficiently to 
B) overreact and then correct in response to 
C) overreact and never correct in response to 
D) ignore 
E) adjust slowly to 
A) adjust quickly and efficiently to 
B) overreact and then correct in response to 
C) overreact and never correct in response to 
D) ignore 
E) adjust slowly to

Question 15

The Asian stock market crash of 1990 was followed by a:

Accepted Answer

A) long bull market. 
B) rapid recovery. 
C) prolonged flat market. 
D) short-term decline. 
E) long bear market. 
A) long bull market. 
B) rapid recovery. 
C) prolonged flat market. 
D) short-term decline. 
E) long bear market.

Question 16

Research on semistrong-form efficient markets indicates which one of the following is correct?

Accepted Answer

A) Identifying a stock with repetitive price movements is generally the best method of active investing. 
B) Future returns on large company stocks tend to closely follow past pricing patterns. 
C) Buying and holding a broad market index is one of the best investment strategies. 
D) Predicting future stock prices is relatively easy for academic researchers. 
E) Trading costs have little, if any, impact on investment returns. 
A) Identifying a stock with repetitive price movements is generally the best method of active investing. 
B) Future returns on large company stocks tend to closely follow past pricing patterns. 
C) Buying and holding a broad market index is one of the best investment strategies. 
D) Predicting future stock prices is relatively easy for academic researchers. 
E) Trading costs have little, if any, impact on investment returns.

Question 17

The NYSE circuit breakers are recalculated:

Accepted Answer

A) every day 
B) every week 
C) monthly 
D) every 6 months 
E) annually 
A) every day 
B) every week 
C) monthly 
D) every 6 months 
E) annually

Question 18

Which of the following sources of information are used by informed traders?
I.financial statements
II.inside information
III.internet reports
IV.analysts reports

Accepted Answer

A) I and IV only 
B) II and III only 
C) III and IV only 
D) I, III, and IV only 
E) I, II, III, and IV 
A) I and IV only 
B) II and III only 
C) III and IV only 
D) I, III, and IV only 
E) I, II, III, and IV

Question 19

Which one of the following statements is correct?

Accepted Answer

A) Company insiders are not permitted to trade their employer's securities. 
B) Only tippers can be accused of illegal insider trading. 
C) Tippees are permitted to trade securities based on information they know is private. 
D) Trading on private information which you just happen to overhear is legal. 
E) Any trading based on information known to be private is illegal. 
A) Company insiders are not permitted to trade their employer's securities. 
B) Only tippers can be accused of illegal insider trading. 
C) Tippees are permitted to trade securities based on information they know is private. 
D) Trading on private information which you just happen to overhear is legal. 
E) Any trading based on information known to be private is illegal.

Question 20

Which one of the following best describes the type(s)of information included in a strong-form efficient market?

Accepted Answer

A) historical 
B) historical and public 
C) private and public 
D) current and public 
E) historical and private 
A) historical 
B) historical and public 
C) private and public 
D) current and public 
E) historical and private

From the end of 1989 to the spring of 2003,the Nikkei Index declined in value approximately _____ percent.

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

Which of the following factors contributed to the Crash of 1987? I.irrational investors II.program trading III.panic selling IV.price uncertainty

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

Efficient markets tend to exist:

A trader was found guilty of violating insider trading laws.As part of his sentencing,he had to forfeit the excessive profits earned on the illegal trades.What does this conviction indicate about the current form of market efficiency?

The day-of-the-week effect refers to which trading day?

The value of the Amex Internet Index increased by about _ percent from October 1998 to March 2000 and subsequently declined by about _ percent by October 2002.

The January effect:

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

The primary purpose of the NYSE circuit breakers is to:

Which one of the following items is most apt to be considered material non-public information? Assume that none of this information is known publicly.

Which of the following are ineffective strategies for producing excess returns if the market is semistrong-form efficient? I.graphing past prices searching for patterns II.watching the daily market movements III.studying the latest analyst's reports IV.analyzing a firm's financial statements

Market prices tend to _____ earnings "surprises".

The Asian stock market crash of 1990 was followed by a:

Research on semistrong-form efficient markets indicates which one of the following is correct?

The NYSE circuit breakers are recalculated:

Which of the following sources of information are used by informed traders? I.financial statements II.inside information III.internet reports IV.analysts reports

Which one of the following statements is correct?

Which one of the following best describes the type(s)of information included in a strong-form efficient market?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 7: Stock Price Behavior and Market Efficiency

From the end of 1989 to the spring of 2003,the Nikkei Index declined in value approximately _____ percent.

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

Which of the following factors contributed to the Crash of 1987? I.irrational investors II.program trading III.panic selling IV.price uncertainty

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

Efficient markets tend to exist:

A trader was found guilty of violating insider trading laws.As part of his sentencing,he had to forfeit the excessive profits earned on the illegal trades.What does this conviction indicate about the current form of market efficiency?

The day-of-the-week effect refers to which trading day?

The value of the Amex Internet Index increased by about _____ percent from October 1998 to March 2000 and subsequently declined by about _____ percent by October 2002.

The January effect:

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

The primary purpose of the NYSE circuit breakers is to:

Which one of the following items is most apt to be considered material non-public information? Assume that none of this information is known publicly.

Which of the following are ineffective strategies for producing excess returns if the market is semistrong-form efficient? I.graphing past prices searching for patterns II.watching the daily market movements III.studying the latest analyst's reports IV.analyzing a firm's financial statements

Market prices tend to _____ earnings "surprises".

The Asian stock market crash of 1990 was followed by a:

Research on semistrong-form efficient markets indicates which one of the following is correct?

The NYSE circuit breakers are recalculated:

Which of the following sources of information are used by informed traders? I.financial statements II.inside information III.internet reports IV.analysts reports

Which one of the following statements is correct?

Which one of the following best describes the type(s)of information included in a strong-form efficient market?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

The value of the Amex Internet Index increased by about _ percent from October 1998 to March 2000 and subsequently declined by about _ percent by October 2002.