(完整word版)投资学第7版TestBank答案11

1、Chapter 11 The Efficient Market HypothesisMultiple Choice Questions1. If you believe in the form of the EMH, you believe that stock prices reflect allrelevant information including historical stock prices and current public information about the firm, but not information that is available only to in

2、siders.A) semistrongB) strongC) weakD) A, B, and CE) none of the aboveAnswer: A Difficulty: EasyRationale: The semistrong form of EMH maintains that stock prices immediately reflect all historical and current public information, but not inside information.2. Proponents of the EMH typically advocateA

3、) an active trading strategy.B) investing in an index fund.C) a passive investment strategy.D) A and BE) B and CAnswer: E Difficulty: EasyRationale: Believers of market efficiency advocate passive investment strategies, and an investment in an index fund is one of the most practical passive investme

4、nt strategies, especially for small investors.3. If you believe in the form of the EMH, you believe that stock prices reflect allinformation that can be derived by examining market trading data such as the history of past stock prices, trading volume or short interest.A) semistrongB) strongC) weakD)

5、 all of the aboveE) none of the aboveAnswer: C Difficulty: EasyRationale: The information described above is market data, which is the data set for the weak form of market efficiency. The semistrong form includes the above plus all other public information. The strong form includes all public and pr

6、ivate information.4. If you believe in the form of the EMH, you believe that stock prices reflectall available information, including information that is available only to insiders.A) semistrongB) strongC) weakD) all of the aboveE) none of the aboveAnswer: B Difficulty: EasyRationale: The strong for

7、m includes all public and private information.5. If you believe in the reversal effect, you shouldA) buy bonds in this period if you held stocks in the last period.B) buy stocks in this period if you held bonds in the last period.C) buy stocks this period that performed poorly last period.D) go shor

8、t.E) C and DAnswer: C Difficulty: EasyRationale: The reversal effect states that stocks that do well in one period tend to perform poorly in the subsequent period, and vice versa.6. focus more on past price movements of a firms stock than on theunderlying determinants of future profitability.A) Cred

9、it analystsB) Fundamental analystsC) Systems analystsD) Technical analystsE) All of the aboveAnswer: D Difficulty: EasyRationale: Technicians attempt to predict future stock prices based on historical stock prices.2597. above which it is difficult for the market to rise.A) Book value is a valueB) Re

10、sistance level is a valueC) Support level is a valueD) A and BE) A and CAnswer: B Difficulty: EasyRationale: When stock prices have remained stable for a long period, these prices are termed resistance levels; technicians believe it is difficult for the stock prices to penetrate these resistance lev

11、els.8. the return on a stock beyond what would be predicted from marketmovements alone.A) An excess economic return isB) An economic return isC) An abnormal return isD) A and BE) A and CAnswer: E Difficulty: EasyRationale: An economic return is the expected return, based on the perceived level of ri

12、sk and market factors. When returns exceed these levels, the returns are called abnormal or excess economic returns.9. The debate over whether markets are efficient will probably never be resolved because of .A) the lucky event issue.B) the magnitude issue.C) the selection bias issue.D) all of the a

13、bove.E) none of the above.Answer: D Difficulty: EasyRationale: Factors A, B, and C all exist make rigid testing of market efficiency difficult or impossible.10. A common strategy for passive management is .A) creating an index fundB) creating a small firm fundC) creating an investment clubD) A and C

14、E) B and CAnswer: A Difficulty: EasyRationale: The index fund is, by definition, passively managed. The other investment alternatives may or may not be managed passively.11. Arbel (1985) found thatA) the January effect was highest for neglected firms.B) the book-to-market value ratio effect was high

15、est in JanuaryC) the liquidity effect was highest for small firms.D) the neglected firm effect was independent of the small firm effect.E) small firms had higher book-to-market value ratios.Answer: A Difficulty: ModerateRationale: Arbel divided firms into highly researched, moderately researched, an

16、d neglected groups based on the number of institutions holding the stock.12. Researchers have found that most of the small firm effect occursA) during the spring months.B) during the summer months.C) in December.D) in January.E) randomly.Answer: D Difficulty: ModerateRationale: Much of the so-called

17、 small firm effect simply may be the tax-effect as investors sell stocks on which they have losses in December and reinvest the funds in January. As small firms are especially volatile, these actions affect small firms in a more dramatic fashion.13. Malkiel (1995) calculated that the average alphas,

18、 or abnormal returns, on a large sample of mutual funds betwee n 1972 and 1991 wereA) sig nifica ntly positive.B) significantly negative.C) statistically indistinguishable from zero.D) positive before 1981 and negative thereafter.E) negative before 1981 and positive thereafter.An swer: C Difficulty:

19、 ModerateRati on ale: Malkiels study suggests that fund man agers do not beat the market on a risk-adjusted basis.14. Basu (1977, 1983) found that firms with low P/E ratiosA) earned higher average returns than firms with high P/E ratios.B) earned the same average returns as firms with high P/E ratio

20、s.C) earned lower average returns than firms with high P/E ratios.D) had higher divide nd yields tha n firms with high P/E ratios.E) none of the above.An swer: A Difficulty: ModerateRati on ale: Firms with high P/E ratios already have an in flated price relative to earnings and thus tend to have low

21、er returns tha n low P/E ratio stocks. However, the P/E ratio may capture risk not fully impo un ded in market betas so this may represe nt an appropriate risk adjustme nt rather tha n a market ano maly.15. Jaffe (1974) found that stock prices after insiders intensively bought shares.A) decreasedB)

22、did not changeC) in creasedD) became extremely volatileE) became much less volatileAn swer: C Difficulty: ModerateRati on ale: In sider trad ing may sig nal private in formati on.16. Banz (1981) found that, on average, the risk-adjusted returns of small firmsA) were higher than the risk-adjusted ret

23、urns of large firms.B) were the same as the risk-adjusted returns of large firms.C) were lower than the risk-adjusted returns of large firms.D) were unrelated to the risk-adjusted returns of large firms.E) were negative.Answer: A Difficulty: ModerateRationale: Banz found A to be true, although subse

24、quent studies have attempted to explain the small firm effect as the January effect, the neglected firm effect, etc.17. Proponents of the EMH think technical analystsA) should focus on relative strength.B) should focus on resistance levels.C) should focus on support levels.D) should focus on financi

25、al statements.E) are wasting their time.Answer: E Difficulty: ModerateRationale: Technical analysts attempt to predict future stock prices from historic stock prices; proponents of EMH believe that stock price changes are random variables.18. Studies of positive earnings surprises have shown that th

26、ere isA) a positive abnormal return on the day positive earnings surprises are announced.B) a positive drift in the stock price on the days following the earnings surprise announcement.C) a negative drift in the stock price on the days following the earnings surprise announcement.D) both A and B are

27、 true.E) both A and C are true.Answer: D Difficulty: ModerateRationale: The market appears to adjust to earnings information gradually, resulting in a sustained period of abnormal returns.19. On November 22, 2005 the stock price of Walmart was $39.50 and the retailer stock index was 600.30. On Novem

28、ber 25, 2005 the stock price of Walmart was $40.25 and the retailer stock index was 605.20. Consider the ratio of Walmart to the retailer index on November 22 and November 25. Walmart is the retail industry andtechnical analysts who follow relative strength would advise the stock.A) outperforming, b

29、uyingB) outperforming, sellingC) underperforming, buyingD) underperforming, sellingE) equally performing, neither buying nor sellingAnswer: A Difficulty: Moderate Rationale: 11/22: $39.50/600.30 = 0.0658; 11/25: $40.25/605.20 = 0.0665; Thus, K-Marts relative strength is improving and technicians usi

30、ng this technique would recommend buying.20. Work by Amihud and Mendelson (1986,1991)A) argues that investors will demand a rate of return premium to invest in less liquid stocks.B) may help explain the small firm effect.C) may be related to the neglected firm effect.D) B and C.E) A, B, and C.Answer

31、: E Difficulty: Moderate Rationale: Lack of liquidity may affect the returns of small and neglected firms; however the theory does not explain why the abnormal returns are concentrated in January.21. Fama and French (1992) found that the stocks of firms within the highest decile of market/book ratio

32、s had average monthly returns of while the stocks of firmswithin the lowest decile of market/book ratios had average monthly returns of.A) greater than 1%, greater than 1%B) greater than 1%, less than 1%C) less than 1%, greater than 1%D) less than 1%, less than 1%E) less than 0.5%, greater than 0.5%

33、Answer: C Difficulty: Moderate Rationale: This finding suggests either that low market-to-book ratio firms are relatively underpriced, or that the market-to-book ratio is serving as a proxy for a risk factor that affects expected equilibrium returns.22. A market decline of 23% on a day when there is

34、 no significant macroeconomic event consistent with the EMH because .A) would be, it was a clear response to macroeconomic news.B) would be, it was not a clear response to macroeconomic news.C) would not be, it was a clear response to macroeconomic news.D) would not be, it was not a clear response t

35、o macroeconomic news.E) none of the above.Answer: D Difficulty: ModerateRationale: This happened on October 19, 1987. Although this specific event is not mentioned in this edition of the book, it is an example of something that would be considered a violation of the EMH.23. In an efficient market, .

36、A) security prices react quickly to new informationB) security prices are seldom far above or below their justified levelsC) security analysts will not enable investors to realize superior returns consistentlyD) one cannot make moneyE) A, B, and CAnswer: E Difficulty: EasyRationale: A, B, and C are

37、true; however, even in an efficient market one should be able to earn the appropriate risk-adjusted rate of return.24. The weak form of the efficient market hypothesis asserts thatA) stock prices do not rapidly adjust to new information contained in past prices or past data.B) future changes in stoc

38、k prices cannot be predicted from past prices.C) technicians cannot expect to outperform the market.D) A and BE) B and CAnswer: E Difficulty: EasyRationale: Stock prices do adjust rapidly to new information.25. A support level is the price range at which a technical analyst would expect theA) supply

39、 of a stock to increase dramatically.B) supply of a stock to decrease substantially.C) demand for a stock to increase substantially.D) demand for a stock to decrease substantially.E) price of a stock to fall.Answer: C Difficulty: EasyRationale: A support level is considered to be a level below that

40、the price of the stock is unlikely to fall and is believed to be determined by market psychology.26. A finding that would provide evidence against the semistrong form of theefficient market theory.A) low P/E stocks tend to have positive abnormal returnsB) trend analysis is worthless in determining s

41、tock pricesC) one can consistently outperform the market by adopting the contrarian approach exemplified by the reversals phenomenonD) A and BE) A and CAnswer: E Difficulty: ModerateRationale: Both A and C are inconsistent with the semistrong form of the EMH.27. The weak form of the efficient market

42、 hypothesis contradictsA) technical analysis, but supports fundamental analysis as valid.B) fundamental analysis, but supports technical analysis as valid.C) both fundamental analysis and technical analysis.D) technical analysis, but is silent on the possibility of successful fundamental analysis.E)

43、 none of the above.Answer: D Difficulty: ModerateRationale: The process of fundamental analysis makes the market more efficient, and thus the work of the fundamentalist more difficult. The data set for the weak form of the EMH is market data, which is the only data used exclusively by technicians. F

44、undamentalists use all public information.28. Two basic assumptions of technical analysis are that security prices adjustA) rapidly to new information and market prices are determined by the interaction of supply and demand.B) rapidly to new information and liquidity is provided by security dealers.

45、C) gradually to new information and market prices are determined by the interaction of supply and demand.D) gradually to new information and liquidity is provided by security dealers.E) rapidly to information and to the actions of insiders.Answer: C Difficulty: ModerateRationale: Technicians follow

46、market data-price changes and volume of trading (as indicator of supply and demand) believing that they can identify price trends as security prices adjust gradually.29. Cumulative abnormal returns (CAR)A) are used in event studies.B) are better measures of security returns due to firm-specific even

47、ts than are abnormal returns (AR).C) are cumulated over the period prior to the firm-specific event.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: As leakage of information occurs, the accumulated abnormal returns that are abnormal returns summed over the period of interest (around t

48、he event date) are better measures of the effect of firm-specific events.30. Studies of mutual fund performanceA) indicate that one should not randomly select a mutual fund.B) indicate that historical performance is not necessarily indicative of future performance.C) indicate that the professional m

49、anagement of the fund insures above market returns.D) A and B.E) B and C.Answer: D Difficulty: EasyRationale: Studies show that all funds do not outperform the market and that historical performance is not necessarily an indicator of future performance.31. The likelihood of an investment newsletters

50、 successfully predicting the direction of the market for three consecutive years by chance should beA) between 50% and 70%.B) between 25% and 50%.C) between 10% and 25%.D) less than 10%.E) greater than 70%.Answer: C Difficulty: ModerateRationale: The probability of successful prediction for 3 consec

51、utive years is 23, or 12.5%.32. In an efficient market the correlation coefficient between stock returns for two non-overlapping time periods should beA) positive and large.B) positive and small.C) zero.D) negative and small.E) negative and large.Answer: C Difficulty: ModerateRationale: In an effici

52、ent market there should be no serial correlation between returns from non-overlapping periods.33. The weather report says that a devastating and unexpected freeze is expected to hit Florida tonight, during the peak of the citrus harvest. In an efficient market one would expect the price of Florida O

53、ranges stock toA) drop immediately.B) remain unchanged.C) increase immediately.D) gradually decline for the next several weeks.E) gradually increase for the next several weeks.Answer: A Difficulty: ModerateRationale: In an efficient market the price of the stock should drop immediately when the bad

54、news is announced. If later news changes the perceived impact to Florida Orange, the price may once again adjust quickly to the new information. A gradual change is a violation of the EMH.34. Matthews Corporation has a beta of 1.2. The annualized market return yesterday was 13%, and the risk-free ra

55、te is currently 5%. You observe that Matthews had an annualized return yesterday of 17%. Assuming that markets are efficient, this suggests thatA) bad news about Matthews was announced yesterday.B) good news about Matthews was announced yesterday.C) no news about Matthews was announced yesterday.D)

56、interest rates rose yesterday.E) interest rates fell yesterday.Answer: B Difficulty: ModerateRationale: AR = 17% - (5% + 1.2 (8%) = +2.4%. A positive abnormal return suggests that there was firm-specific good news.35. Nicholas Manufacturing just announced yesterday that its t4h quarter earnings will

57、 be 10% higher than last years 4th quarter. You observe that Nicholas had an abnormal return of -1.2% yesterday. This suggests thatA) the market is not efficient.B) Nicholas stock will probably rise in value tomorrow.C) investors expected the earnings increase to be larger than what was actually announced.D) investors expected the earnings increase to be smaller than what was actually announced.E) earnings are expected to decrease next quarter.Answer: C Difficulty: ModerateRationale: Anticipated earnings changes are impounded into a securitys price as soon as expectations are formed