CORPORATE FINANCE ACCESS CARD
12th Edition
ISBN: 2810023360184
Author: Ross
Publisher: MCG
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Chapter 14, Problem 28CQ
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Question 5
According to the strong form of efficient market hypothesis:
Using past price and volume information one can earn abnormally high returns from stocks.
Using insider information one can earn abnormally high returns from stocks.
Private information is of no help in earning abnormally high returns.
Financial statement analysis can be used to earn abnormally high returns from stocks.
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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
Which of the following sources of market inefficiency would be most easily exploited?a. A stock price drops suddenly due to a large sale by an institution.b. A stock is overpriced because traders are restricted from short sales.c. Stocks are overvalued because investors are exuberant over increased productivity in the economy.
Chapter 14 Solutions
CORPORATE FINANCE ACCESS CARD
Ch. 14 - Prob. 1CQCh. 14 - Prob. 2CQCh. 14 - Efficient Market Hypothesis Which of the following...Ch. 14 - Market Efficiency Implications Explain why a...Ch. 14 - Efficient Market Hypothesis A stock market analyst...Ch. 14 - Semistrong Efficiency If a market is semistrong...Ch. 14 - Efficient Market Hypothesis What are the...Ch. 14 - Prob. 8CQCh. 14 - Prob. 9CQCh. 14 - Efficient Market Hypothesis For each of the...
Ch. 14 - Technical Analysis What would a technical analyst...Ch. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Efficient Markets A hundred years ago or so,...Ch. 14 - Efficient Market Hypothesis Aerotech, an aerospace...Ch. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Efficient Market Hypothesis Newtech Corp. is going...Ch. 14 - Prob. 19CQCh. 14 - Efficient Market Hypothesis The Durkin Investing...Ch. 14 - Efficient Market Hypothesis Your broker commented...Ch. 14 - Efficient Market Hypothesis A famous economist...Ch. 14 - Efficient Market Hypothesis Suppose the market is...Ch. 14 - Prob. 24CQCh. 14 - Prob. 25CQCh. 14 - Efficient Market Hypothesis Assume that markets...Ch. 14 - Prob. 27CQCh. 14 - Evidence on Market Efficiency Some people argue...Ch. 14 - Prob. 1QAPCh. 14 - Prob. 2QAPCh. 14 - Prob. 3QAPCh. 14 - Prob. 4QAPCh. 14 - Prob. 1MCCh. 14 - Prob. 2MCCh. 14 - Prob. 3MC
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- Which of the following statements about the Efficient Market Hypothesis (EMH) is incorrect? Group of answer choices a)If the market is strong-form efficient, investors can not earn abnormal returns using inside information. b) If the investment in small firms earns a positive abnormal return, the stock market is not semi-strong form efficient. c) If a market is efficient, investors tend to follow a passive investment strategy. d) If the future stock price change depends on its history, the market is not weak-form efficient. e) If a market is weak-form efficient, fundamental analysis can not earn a positive abnormal return.arrow_forwardWhat is Efficient Market Hypothesis (EMH) Does the Global Financial Crisis of 2008-09 support or invalidate the EMH? article if needed: The Global Financial Crisis and the Efficient Market Hypothesis, What have we learned?arrow_forwardDue to an unexpected pandemic, the uncertainty levels have gone up tremendously in the financial markets. Among other things, this increased uncertainty would cause the market value ratios to increase. Group of answer choices True Falsearrow_forward
- The efficient markets hypothesis True or False: The efficient markets hypothesis holds only if all investors are rational. False True Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to “beat” the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement: Current market prices reflect all information contained in past price movements. This statement is consistent with: Strong form efficiency Semistrong form efficiency Weak form efficiency…arrow_forwardWhich one of the following statements is true? Market crashes tend to be accompanied by low market volume. The Asian market crash was followed by a quick recovery. The market crashes of 1929 and 1987 are very similar in both the percentage decline in market value and in the ensuing market recovery. Market crashes tend to follow market bubbles. Market bubbles and crashes prove that financial markets are inefficient.arrow_forwardWhy are the following “issues” considered efficient market anomalies? Are there rational explanations for any of these effects within the efficient market framework? Please explain your thinking and support with appropriate academic evidence. Magnitude Issue Lucky Event Issuearrow_forward
- What is a "Bubble?" Does a bubble in the Stock Market mean that the Market is not efficient?arrow_forwardApplying the capital asset pricing model requires that one find appropriate inputs for the risk-free rate, the market rate of return (and market risk premium), and beta. Why is beta, in particular, difficult to pin down? a. People don't have ready access to financial data and won't have any source for this information in the near future. b. The major internet sources of financial data are notoriously unreliable. c. Hackers have been known to manipulate financial data for their own purposes. d. People must rely on historical performance information, and they have to assume that historical relationships continue into the future.arrow_forward(a) The Efficient Market Hypothesis (EMH) is a theory that explores the relationship between the availability of information and asset prices. It argues that all available information is already reflected in the price of share and therefore, it is impossible to beat the market over the long-term. Briefly explain the sub-hypotheses in EMH.arrow_forward
- What is weak-form EMH? What would you expect to see/not see if markets where weak form efficient? In other words, can you think of market events that would serve as evidence that market is or isn’t weak-form efficient?arrow_forwardThe weak form of the efficient market hypothesis implies that: CHOOSE ONE A. Investors can achieve abnormal returns, on average, using technical analysis, after adjusting for transaction costs and taxes. B. Insiders, such as specialists and corporate board members, cannot achieve abnormal returns on average. C. No one can achieve abnormal returns using market information. D. NONE OF THE ABOVEarrow_forwardRegarding Efficient Market Hypothesis (EMH), which of the following statements is TRUE? Investors in the market are assumed to be rational and own private information. If the semi-strong form of EMH is true, all information contained in the history of past prices has been reflected by the current price. If the semi-strong form of EMH is true, you cannot beat the market by trading on private information. Post-earnings announcement drift is consistent with the semi-strong form of EMH.arrow_forward
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Efficient Market Hypothesis - EMH Explained Simply; Author: Learn to Invest - Investors Grow;https://www.youtube.com/watch?v=UTHvfI9awBk;License: Standard Youtube License