Chapter 12. The Efficient Market Hypothesis. Random Walk and the EMH. Random Walk - stock prices are random Actually submartingale Expected price is positive over time Positive trend and random about the trend. Random Walk with Positive Trend. Security Prices. Time.
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
The Efficient Market Hypothesis
Even if the market is efficient a role exists for portfolio management
According to the efficient market hypothesis, __________. ________.A) positive alphas on stocks will disappear quicklyB) low beta stocks are consistently underpricedC) high beta stocks are consistently overpricedD) None of the above answers is correctAnswer A
Research on the strong form of market efficiency shows that ________ are generally able to achieve superior returns.A) members of the SECB) the majority of professional mutual fund managersC) corporate insidersD) stock brokersAnswer C
The ______________ of the efficient market hypothesis suggests that there is little or nothing to be gained from studying past stock price trends.A) weak formB) semi-weak formC) semi-strong formD) strong form Answer A
Which one of the following forms of market efficiency is violated if you can earn excess return by buying stocks of firms which make merger announcements?A) Weak form.B) Semi-weak form.C) Semi-strong form.D) Strong form.Answer C
The efficient market hypothesis suggests that ___________. violated if you can earn excess return by buying stocks of firms which make merger announcements?A) no investors can earn a positive return at any point in time.B) no investors can earn a positive return persistently over time.C) no investors can earn an excess return at any point in time.D) no investors can earn an excess return persistently over timeAnswer D
The January effect of small firms is greatest ________. violated if you can earn excess return by buying stocks of firms which make merger announcements?A) in leap yearsB) in presidential election yearsC) late in the monthD) early in the monthAnswer D
Which of the following has(have) been considered market anomalies?A) the reversal effectB) the book-to-market effectC) the small-firm January effectD) All of the above have been considered market anomalies Answer D
Empirical evidence supporting the semi-strong form market efficiency suggests that investors should follow ____________ investment strategy.A) a passiveB) an activeC) a conservativeD) an aggressiveAnswer A