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254 Frederic S. Mishkin Economics of Money, Banking, and Financial Markets, Seventh Edition

82)

The number and availability of discount brokers has grown rapidly since the mid-1970s. The efficient markets hypothesis predicts that people who use discount brokers

(a)

will likely earn lower returns than those who use full-service brokers.

(b)

will likely earn about the same as those who use full-service brokers, but will net more after brokerage commissions.

(c)

are going against evidence suggesting that full-service brokers can help outperform the market.

(d)

are likely to be poor.

(e)

are likely to outperform the market by a wide margin.

Answer:

Question Status: Study Guide

83)

If a mutual fund outperforms the market in one period, evidence suggests that this fund is

(a)

highly likely to consistently outperform the market in subsequent periods due to its superior investment strategy.

(b)

likely to under-perform the market in subsequent periods to average its overall returns.

(c)

not likely to consistently outperform the market in subsequent periods.

(d)

not likely to outperform the market in any subsequent period.

(e)

not likely to under-perform the market in any subsequent period.

Answer:

Question Status: Study Guide

84)

Studies of mutual fund performance indicate that mutual funds that outperformed the market in one time period

(a)

usually beat the market in the next time period.

(b)

usually beat the market in the next two subsequent time periods.

(c)

usually beat the market in the next three subsequent time periods.

(d)

usually do not beat the market in the next time period.

Answer:

Question Status: Previous Edition

85)

Sometimes one observes that the price of a company’s stock falls after the announcement of favorable earnings. This phenomenon is

(a)

clearly inconsistent with the efficient markets hypothesis.

(b)

consistent with the efficient markets hypothesis if the earnings were not as high as anticipated.

(c)

consistent with the efficient markets hypothesis if the earnings were not as low as anticipated.

(d)

consistent with the efficient markets hypothesis if the favorable earnings were expected.

Answer:

Question Status: Previous Edition

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