Chapter 1, Problem 10.9EC

You buy a stock from the capital market. If the capital market is semi-strong efficient, which of the following statements is NOT correct? a. You cannot earn any abnormal returns above the required return by trading on public information. b. Past stock prices can be used to predict future stock prices. c. The technical analysis of publicly available information will not lead to any abnormal returns. d. The stock is fairly priced. e. Stock prices reflect all publicly available information.

Which of the following is not a characteristic of an efficient market? Investors can frequently make profits by predicting asset market prices that are different from intrinsic values. The market value of all securities at any one instant in time fully reflect all available information. Investors act rationally. The forces of demand and supply work to maintain that the security's market price and its intrinsic value are in equilibrium.

According to the efficient market, which of the following are not true?   Select one: securities are in equilibrium prices fully reflect all public information available the investors should not waste their time on under- or over-valued securities None of the answers are correct the market has demonstrated that stocks are not reasonably priced.

The small firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect and discuss whether it represents sufficient information to conclude that the stock market does not operate efficiently. In formulating your response, consider: (a) what it means for the stock market to be inefficient, and (b) what role the measurement of risk plays in your conclusions about each effect.

Strong form efficient market hypothesis states that stock prices reflects all the information in a market. The information may be public or private (i.e., insider information about the market) and such information will not benefit  an investor in the form of higher returns.

Which of the following is FALSE about the semi-strong form of market efficiency?     All publicly available information is reflected in stock prices     Fundamental analysis can help investors to outperform the market     Technical analysis cannot be used to outperform the market     Only private information can help investors to outperform the market

If you are worried that a panicked market might causethe price of one of your stocks to plunge, what type ofsell order could you use with your broker to limit yourlosses?

Which is correct about security valuation? A. In an efficient market, several factors would affect the market and value is not necessarily equals the price. B. The value of the security is determined to compare it with the current market price and usually investor would buy when the value equals the price. C. Sellers would prefer the accept lower bid price than higher bid price to realize gains. D. Investors buy securities when securities are underpriced and sell them when it is overpriced. E. All of the above F. None of the above

Why doesn’t a volatile stock price necessarily imply irrationalpricing?