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Multiple Choice Quiz
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1.
The book-market effect refers to the findings that firms with high ratios of book value to market value tend to ______________ firms with lower ratios.
A)outperform
B)underperform
C)perform similarly to
D)None of the above.
2.
If stock returns exhibit positive serial correlation, this means that ______________ returns tend to follow ______________ returns.
A)positive; positive
B)positive; negative
C)negative; negative
D)Both B and C above.
3.
According to the strong form market efficiency, stock prices should fully reflect ______________ information.
A)all public and private
B)all public
C)all public and political
D)all political and financial
4.
Which one of the following forms of market efficiency is violated if you can earn excess return by buying stocks of firms which make earnings restatement announcements?
A)Weak form.
B)Semi-weak form.
C)Semi-strong form.
D)Strong form.
5.
Empirical findings generally show that a typical mutual fund has a ______________.
A)positive alpha
B)negative alpha
C)zero alpha
D)return higher than the S&P 500 index
6.
The ______________ of the efficient market hypothesis suggests that there is little or nothing to be gained from technical analysis.
A)weak form
B)semi-weak form
C)semi-strong form
D)strong form
7.
The efficient market hypothesis suggests that ______________.
A)no investors can earn excess returns persistently over time
B)no investors can earn positive returns persistently over time
C)no investors can earn excess returns at any point in time
D)no investors can earn positive returns at any point in time
8.
Empirical analysis on the strong form of market efficiency finds that ______________ are generally able to achieve superior returns.
A)hedge fund managers
B)professional money managers
C)stock exchange specialists
D)corporate insiders
9.
______________ stock returns over time would support the weak-form market efficiency.
A)Independent
B)Negatively correlated
C)Positively correlated
D)All of the above.
10.
The findings that men trade much more actively than women are consistent with the notion of ______________.
A)market inefficiency
B)conservatism
C)mental accounting
D)overconfidence
11.
Stock prices follow a random walk because ______________.
A)investors are irrational
B)information arrives at an unpredictable manner
C)information is not efficient
D)the stock market is random
12.
Some researchers have found that firms with low P/E ratios ______________.
A)outperform firms with high P/E ratios
B)underperform firms with high P/E ratios
C)have the same performance as firms with high P/E ratios
D)None of the above.
13.
The semi-strong form of the market efficiency contradicts ______________.
A)fundamental analysis, but support the possibility of successful insider trading
B)both technical analysis and fundamental analysis
C)fundamental analysis, but supports technical analysis as valid
D)technical analysis, but supports fundamental analysis as valid
14.
The small-firm January effect refers to the phenomenon that stock prices of small firms ______________.
A)decline in January
B)rise in December and decline in January
C)decline in December and rise in January
D)decline in December
15.
Behavioral finance attempts to explain the anomalies with ______________.
A)tax-induced behavior by investors
B)government regulation ineffectiveness
C)institutional investor mismanagement
D)irrational behavior by investors





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