Efficient Market Hypothesis Flashcards
Which of the following statements regarding the Efficient Market Hypothesis is false?
A. An efficient market is one in which stock prices fully reflect available information.
B. On average, no abnormal returns can be obtained by trading on freely available public information.
C. In an efficient market the price of the shares immediately adjust to new information.
D. If the new information about a company is particularly good, it may take several days for the price of the stock to adjust.
D
Which of the following is not a version of the Efficient Market Hypothesis?
A. Semistrong form.
B. Weak form.
C. Ultrastrong form.
D. Strong form.
C
Which of the following statement regarding the types of efficiency is true?
A. Semistrong form efficiency implies strong form efficiency.
B. Weak form efficiency implies semistrong form efficiency.
C. Weak form efficiency implies strong form efficiency.
D. Strong form efficiency implies semistrong form efficiency.
D
Which of the following statements regarding the Efficient Market Hypothesis is true?
A. According to the EMH all stock should have the same expected returns.
B. According to the EMH prices are uncaused.
C. According to the EMH prices reflect underlying value.
D. According to the EMH managers can boost stock prices through creative accounting.
C
Which of the following statements regarding the weak form efficiency is false?
A. If markets are weakly efficient, then stock prices follow a random walk.
B. If markets are weakly efficient, then managers can get abnormal returns by analyzing firm earnings and forecasts.
C. If markets are weakly efficient, the current prices reflect past prices.
D. It is the weakest type of efficiency that we would expect a financial market to display.
B
Which of the following is not a condition that would cause a market to be efficient?
A. Investors’ rationality.
B. Independent deviations from rationality.
C. Investors’ risk aversion.
D. Arbitrage.
C
