Chapter 14 | Efficient Captial Markets and Behavioral Challenges
If you can beat the market by __________, then you are violating weak form efficiency.
Analyzing historical price patterns
A real-world example that does not support market efficiency is called a(n) ______.
Anomaly
Efficient markets theory implies that company buyouts based on the belief that the target company is underpriced are ______ bets.
Bad
A new music player comes out that is far superior to any other format, but you keep on buying music in the same old format. This would be an example of the psychological trait of ______.
Conservatism
True or false: Throwing darts at the financial pages to construct a portfolio is not be a good strategy because professional security analysts always outperform dart portfolios.
False
If new, negative information reaches the market and stock prices slowly decrease, the market has reacted ___.
Inefficiently
An efficient market is one that fully reflects all available ___.
Information
Which of the following summarize the behavioral arguments against efficient markets? Inside information is just too pervasive to ignore. Irrationality may not cancel out across investors. Arbitrage strategies may be too risky. Investors may not be rational.
Irrationality may not cancel out across investors. Arbitrage strategies may be too risky. Investors may not be rational.
If managers who want to issue equity believe the company's stock is overpriced, they are likely to __________.
Issue equity immediately
According to the efficient markets hypothesis, the timing of a new equity issue is __________ important.
Not
What types of information affect the rates at which stock prices adjust to new information?
Past Information Publicly Available Information All Information
The investor trait of ______ occurs when investors draw conclusions from insufficient data.
Representativeness
If you beat the market with inside information, you have violated the concept of __________ form efficiency.
Strong
Beating the market __________ would illustrate a violation of semistrong form efficiency.
by analyzing financial statements
Weak form efficiency
considers trading strategies that use information based solely on past stock prices
In an efficient market, firms should expect to receive __________ value for securities they sell.
fair
If company managers believe interest rates will rise, they have a(n) ___________ to borrow long term.
incentive
It is not uncommon for IPOs to __________ experience large gains.
initially
The behavioral view holds that __________ investors are irrational.
some