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

119)

The efficient markets hypothesis suggests that

(a)

investors should purchase no-load mutual funds which have low management fees.

(b)

investors can use the advice of technical analysts to outperform the market.

(c)

investors let too many unexploited profit opportunities go by if they adopt a “buy and hold” strategy.

(d)

only (a) and (b) of the above are sensible strategies.

Answer:

Question Status: Revised

120)

The efficient markets hypothesis suggests that

(a)

incorrectly valued assets are quickly discovered and traded until their prices reflect their correct underlying value.

(b)

most investors will not earn excess returns from paying for technical market analysis.

(c)

“buy and hold” a well-diversified portfolio of securities is the best strategy for most investors.

(d)

all of the above are true.

(e)

both (a) and (c) of the above are true.

Answer:

Question Status: Study Guide

121)

The behavior of which asset price(s) supports the efficient markets hypothesis?

(a)

Stocks

(b)

Bonds

(c)

Exchange rates

(d)

All of the above

(e)

Both (a) and (b) of the above.

Answer:

Question Status: New

122)

The tech stock crash of 2000 is evidence in support of

(a)

the efficient markets hypothesis.

(b)

a rational bubble.

(c)

rational expectations.

(d)

all of the above.

(e)

both (a) and (c) of the above.

Answer:

Question Status: New

123)

A situation when an asset price differs from its fundamental value is a(n)

(a)

random walk.

(b)

inflation.

(c)

deflation.

(d)

efficient market.

(e)

bubble.

Answer:

Question Status: New

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