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Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Markets Hypothesis 257

95)

Rules used to predict movements in stock prices based on past patterns are, according to the efficient markets hypothesis,

(a)

a waste of time.

(b)

profitably employed by all financial analysts.

(c)

the most efficient rules to employ.

(d)

consistent with the random walk hypothesis.

Answer:

Question Status: Previous Edition

96)

Tests used to rate the performance of rules developed in technical analysis conclude that

(a)

technical analysis outperforms the overall market.

(b)

technical analysis far outperforms the overall market, suggesting that stockbrokers provide valuable services.

(c)

technical analysis does not outperform the overall market.

(d)

technical analysis does not outperform the overall market, suggesting that stockbrokers do not provide services of any value.

Answer:

Question Status: Previous Edition

97)

Which of the following accurately summarize the empirical evidence about technical analysis?

(a)

Technical analysts fare no better than other financial analysis—on average they do not outperform the market.

(b)

Technical analysts tend to outperform other financial analysis, but on average they nevertheless under-perform the market.

(c)

Technical analysts fare no better than other financial analysis, and like other financial analysts they outperform the market.

(d)

Technical analysts fare no better than other financial analysis, and like other financial analysts they under-perform the market.

Answer:

Question Status: Previous Edition

98)

The small-firm effect refers to the

(a)

lower than average returns earned by small firms.

(b)

fact that small firms earn returns equal to large firms.

(c)

abnormally high returns earned by small firms.

(d)

fact that small firms earn low returns after adjusting for risk.

(e)

fact that small firms generally earn negative returns.

Answer:

Question Status: New

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