Investments chp 8 quiz

Most tests of semistrong efficiency are _________. based on technical trading rules designed to test whether inside information can be used to generate abnormal returns unable to generate any evidence of market anomalies joint tests of market efficiency and the risk-adjustment measure

joint tests of market efficiency and the risk-adjustment measure

Value stocks usually exhibit ______ price-to-book ratios and ______ price-to-earnings ratios. low; low high; high high; low low; high

low; low

The tendency of poorly performing stocks and well-performing stocks in one period to continue their performance into the next period is called the ________________. reversal effect fad effect momentum effect martingale effect

momentum effect

An implication of the efficient market hypothesis is that __________. low-beta stocks are consistently overpriced nonzero alphas will quickly disappear high-beta stocks are consistently overpriced growth stocks are better buys than value stocks

nonzero alphas will quickly disappear

Market anomaly refers to _______. an exogenous shock to the market that is sharp but not persistent a trading or pricing structure that interferes with efficient buying and selling of securities price behavior that differs from the behavior predicted by the efficient market hypothesis a price or volume event that is inconsistent with historical price or volume trends

price behavior that differs from the behavior predicted by the efficient market hypothesis

Banz found that, on average, the risk-adjusted returns of small firms __________. were lower than the risk-adjusted returns of large firms were the same as the risk-adjusted returns of large firms were negative were higher than the risk-adjusted returns of large firms

were higher than the risk-adjusted returns of large firms

Which of the following statements is (are) correct? If a market is semistrong-form efficient, it is also strong-form efficient. If a market is weak-form efficient, it is also semistrong- and strong-form efficient. If a market is strong-form efficient, it is also semistrong- but not weak-form efficient. If a market is strong-form efficient, it is also semistrong- and weak-form efficient.

If a market is strong-form efficient, it is also semistrong- and weak-form efficient.

Proponents of the EMH typically advocate __________. a passive investment strategy a conservative investment strategy a liberal investment strategy an aggressive investment strategy

a passive investment strategy

The Fama and French evidence that high book-to-market firms outperform low book-to-market firms even after adjusting for beta means that _________. high book-to-market firms have more post-earnings drift low book-to-market firms are underpriced or the book-to-market ratio is a proxy for a systematic risk factor high book-to-market firms are underpriced or the book-to-market ratio is a proxy for a unique risk factor either high book-to-market firms are underpriced or the book-to-market ratio is a proxy for a systematic risk factor

either high book-to-market firms are underpriced or the book-to-market ratio is a proxy for a systematic risk factor

According to the semistrong form of the efficient markets hypothesis, ____________. corporate insiders should have no better investment performance than other investors even if allowed to trade freely stock prices do not rapidly adjust to new information arbitrage between futures and cash markets should not produce extraordinary profits future changes in stock prices cannot be predicted from any information that is publicly available

future changes in stock prices cannot be predicted from any information that is publicly available