Chapter 7 - Textbook Quiz

Which of the following intraday changes in the Dow Jones Industrial Average (DJIA) will trigger a circuit breaker halting NYSE trading for one hour?

10% drop before 2PM

Assume the market is weak-form efficient. If this is true, technical analysts ____ earn excess returns and fundamental analysts ____ earn excess returns

Could; Could Not

After lengthy trial and error, you discover a trading system that would have doubled the value of your investment every six months if applied over the last three years. Which of the following problems makes it difficult to conclude that this is an example of market inefficiency

Data Snooping Problem

Which of the following is not considered a problem when evaluating the ability of a trading system to "beat the market"

Data measurement problem

In discussions of financial market efficiency, which of the following is not one of the stylized forms of market efficiency

Economic form

Which of the following statements concerning market efficiency is true?

If the market is semistrong-form efficient, it is also weak-form efficient

Which of the following is a possible explanation of the January Effect

Institutional Window Dressing ; Tax-Loss Selling

Assume the market is semistrong-form efficient. The best investment strategy to

Invest in an index fund

Which month of the year, on average, has had the highest stock market returns as measured by a small-stock portfolio

January

Which of the following is not true concerning the efficient markets hypothesis

Markets with wide fluctuations in prices cannot be efficient

A market anomaly refers to

Price behavior that differs from the behavior predicted by the efficient markets hypothesis

Circuit breakers implemented by the NYSE were designed to

Slow a market decline

The SEC has regulations that prohibit trading on inside information. If the market is _________ - form efficient, such regulation is not needed

Strong

Which of the following assumptions foes not imply an informationally efficient market

The risk-free rate exists, and investors can borrow and lend unlimited amounts at the risk-free rate

You purchase a stock that you expect to increase in value over the next year. One year later, after the discovery that the CEO embezzled funds and the company is close to bankruptcy, the stock has fallen in price. Which of the following statements is true?

This is not a violation of market efficiency