金融市场与机构(6)解析说课讲解
开学安全教育第一课-中国女排队员
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Chapter 6
Are
Financial Markets Efficient?
Multiple Choice
Questions
1. How expectations are formed is
important because expectations influence
(a)
the demand for assets.
(b) bond prices.
(c) the risk structure of interest rates.
(d) the term structure of interest rates.
(e) all of the above.
Answer: E
2.
According to the efficient market hypothesis, the
current price of a financial security
(a) is
the discounted net present value of future
interest payments.
(b) is determined by the
highest successful bidder.
(c) fully reflects
all available relevant information.
(d) is a
result of none of the above.
Answer: C
3.
The efficient market hypothesis
(a) is based
on the assumption that prices of securities fully
reflect all available information.
(b) holds
that the expected return on a security equals the
equilibrium return.
(c) both (a) and (b).
(d) neither (a) nor (b).
Answer: C
4.
If the optimal forecast of the return on a
security exceeds the equilibrium return, then
(a) the market is inefficient.
(b) an
unexploited profit opportunity exists.
(c) the
market is in equilibrium.
(d) only (a) and (b)
of the above are true.
(e) only (b) and (c) of
the above are true.
Answer: D
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5. According to the
efficient market hypothesis
(a) one cannot
expect to earn an abnormally high return by
purchasing a security.
(b) information in
newspapers and in the published reports of
financial analysts is already reflected
in
market prices.
(c) unexploited profit
opportunities abound, thereby explaining why so
many people get rich by
trading securities.
(d) all of the above are true.
(e) only
(a) and (b) of the above are true.
Answer: E
Another way to state the efficient market
condition is that in an efficient market,
(a)
unexploited profit opportunities will be quickly
eliminated.
(b) unexploited profit
opportunities will never exist.
(c)
arbitrageurs guarantee that unexploited profit
opportunities never exist.
(d) both (a) and
(c) of the above occur.
Answer: A
Another
way to state the efficient market hypothesis is
that in an efficient market,
(a) unexploited
profit opportunities will never exist as market
participants, such as arbitrageurs,
ensure
that they are instantaneously dissipated.
(b)
unexploited profit opportunities will not exist
for long, as market participants will act quickly
to
eliminate them.
(c) every financial
market participant must be well informed about
securities.
(d) only (a) and (c) of the above.
Answer: B
A situation in which the price
of an asset differs from its fundamental market
value is called
(a) an unexploited profit
opportunity.
(b) a bubble.
(c) a
correction.
(d) a mean reversion.
Answer:
B
A situation in which the price of an asset
differs from its fundamental market value
(a)
indicates that unexploited profit opportunities
exist.
(b) indicates that unexploited profit
opportunities do not exist.
(c) need not
indicate that unexploited profit opportunities
exist.
(d) indicates that the efficient market
hypothesis is fundamentally flawed.
Answer: C
6.
7.
8.
9.
10. Studies of
mutual fund performance indicate that mutual funds
that outperformed the market in one
time
period
(a) usually beat the market in the next
time period.
(b) usually beat the market in
the next two subsequent time periods.
(c)
usually beat the market in the next three
subsequent time periods.
(d) usually do not
beat the market in the next time period.
Answer: D
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11. The efficient market hypothesis suggests
that allocating your funds in the financial
markets on the
advice of a financial analyst
(a) will certainly mean higher returns than if
you had made selections by throwing darts at the
financial page.
(b) will always mean lower
returns than if you had made selections by
throwing darts at the
financial page.
(c)
is not likely to prove superior to a strategy of
making selections by throwing darts at the
financial page.
(d) is good for the
economy.
Answer: C
12. Ivan Boesky, the
most successful of the so-called arbs in the
1980s, was able to outperform the
market on a
consistent basis, indicating that
(a)
securities markets are not efficient.
(b)
unexploited profit opportunities were abundant.
(c) investors can outperform the market with
inside information.
(d) only (b) and (c) of
the above.
Answer: D
13. To say that stock
prices follow a “random walk” is to argue that
(a) stock prices rise, then fall.
(b)
stock prices rise, then fall in a predictable
fashion.
(c) stock prices tend to follow
trends.
(d) stock prices are, for all
practical purposes, unpredictable.
Answer: D
14. To say that stock prices follow a “random
walk” is to argue that
(a) stock prices rise,
then fall, then rise again.
(b) stock prices
rise, then fall in a predictable fashion.
(c)
stock prices tend to follow trends.
(d) stock
prices cannot be predicted based on past trends.
Answer: D
15. Rules used to predict
movements in stock prices based on past patterns
are, according to the efficient
markets
theory,
(a) a waste of time.
(b)
profitably employed by all financial analysts.
(c) the most efficient rules to employ.
(d) consistent with the random walk
hypothesis.
Answer: A
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16. Tests used to rate the
performance of rules developed in technical
analysis conclude that
(a) technical analysis
outperforms the overall market.
(b) technical
analysis far outperforms the overall market,
suggesting that stockbrokers provide
valuable
services.
(c) technical analysis does not
outperform the overall market.
(d) technical
analysis does not outperform the overall market,
suggesting that stockbrokers do not
provide
services of any value.
Answer: C
17. Which
of the following types of information will most
likely enable the exploitation of a profit
opportunity?
(a) Financial analysts’
published recommendations
(b) Technical
analysis
(c) Hot tips from a stockbroker
(d) Insider information
Answer: D
18.
Which of the following types of information will
most likely enable the exploitation of a profit
opportunity?
(a) Financial analysts’
published recommendations
(b) Technical
analysis
(c) Hot tips from a stockbroker
(d) None of the above
Answer: D
19.
The advantage of a “buy-and-hold strategy” is that
(a) net profits will tend to be higher because
there will be fewer brokerage commissions.
(b)
losses will eventually be eliminated.
(c) the
longer a stock is held, the higher will be its
price.
(d) only (b) and (c) of the above are
true.
Answer: A
20. The efficient market
hypothesis suggests that
(a) investors should
not try to outguess the market by constantly
buying and selling securities.
(b) investors
do better on average if they adopt a “buy and
hold” strategy.
(c) buying into a mutual fund
is a sensible strategy for a small investor.
(d) all of the above are sensible strategies.
(e) only (a) and (b) of the above are sensible
strategies.
Answer: D
21. Sometimes one
observes that the price of a company’s stock falls
after the announcement of
favorable earnings.
This phenomenon is
(a) clearly inconsistent
with the efficient market hypothesis.
(b)
consistent with the efficient market hypothesis if
the earnings were not as high as anticipated.
(c) consistent with the efficient market
hypothesis if the earnings were not as low as
anticipated.
(d) the result of none of the
above.
Answer: B
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22. Important implications of the
efficient market hypothesis include which of the
following?
(a) Future changes in stock prices
should, for all practical purposes, be
unpredictable.
(b) Stock prices will respond
to announcements only when the information in
these announcements
is new.
(c) Sometimes
a stock price declines when good news is
announced.
(d) All of the above.
(e) Only
(a) and (b) of the above.
Answer: D
23.
Although the verdict is not yet in, the available
evidence indicates that, for many purposes, the
efficient market hypothesis is
(a) a good
starting point for analyzing expectations.
(b)
not a good starting point for analyzing
expectations.
(c) too general to be a useful
tool for analyzing expectations.
(d) none of
the above.
Answer: A
24. The efficient
market 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:
A
25. The efficient market hypothesis applies
to
(a) both the stock market and the foreign
exchange market.
(b) the stock market but not
the foreign exchange market.
(c) the foreign
exchange market but not the stock market.
(d)
neither the stock market nor the foreign exchange
market.
Answer: A
26. According to the
January effect, stock prices
(a) experience an
abnormal price rise from December to January.
(b) experience an abnormal price decline from
December to January.
(c) follow a random walk
during January.
(d) set the pattern for the
entire year in January.
Answer: A
27. The
small-firm effect refers to the observation that
small firms’ stocks
(a) follow a random walk
but large firms’ stocks do not.
(b) have
earned abnormally low returns given their greater
risk.
(c) have earned abnormally high returns
even taking into account their greater risk.
(d) sell for lower prices than do large firms’
stocks.
Answer: C
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28. The efficient markets hypothesis
is weakened by evidence that
(a) stock prices
tend to follow a random walk.
(b) stock prices
are more volatile than fluctuations in their
fundamental values can explain.
(c) technical
analysis does not outperform the overall market.
(d) an investment adviser’s past success or
failure at picking stocks does not predict his or
her
future performance.
Answer: B
29.
Mean reversion refers to the observation that
(a) stock prices overact to news
announcements.
(b) stocks prices are more
volatile than fluctuations in their fundamental
value would predict.
(c) stocks with low
returns are likely to have high returns in the
future.
(d) stocks with low returns are likely
to have even lower returns in the future.
Answer: C
30. Which of the following does
not weaken the efficient markets hypothesis?
(a) Mean reversion
(b) Success of buy-and-
hold strategy
(c) January effect
(d)
Excessive volatility
Answer: B
31. An
important lesson from the Black Monday Crash of
1987 and the tech crash of 2000 is that
(a)
factors other than market fundamentals affect
stock prices.
(b) the strong version of the
efficient market hypothesis, that stock prices
reflect the true
fundamental value of
securities, is correct.
(c) market psychology
has little if any effect on stock prices.
(d)
there is no such thing as a rational bubble.
Answer: A
32. An investor gains from short
selling by _________ and then later _________.
(a) buying a stock; selling it at a higher
price
(b) selling a stock; buying at back at a
lower price
(c) buying a stock; selling it at
a lower price
(d) selling a stock; buying it
back at a higher price
Answer: B
33. Which
of the following is an insight from behavioral
finance?
(a) The price of securities fully
reflects all available information.
(b)
Investor overconfidence leads to high trading
volumes.
(c) The optimal forecast of a
security’s return equals the security’s
equilibrium return.
(d) Investment advisors
cannot consistently beat the market.
Answer: B
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TrueFalse
1. Evidence that stock prices sometimes fall
when a firm announces good news contradicts the
efficient
market hypothesis.
Answer: FALSE
If the security markets are truly efficient,
there is no need to pay for help selecting
securities.
Answer: TRUE
Evidence that a
mutual fund has performed extraordinarily well in
the past contradicts the efficient
market
hypothesis.
Answer: FALSE
In an efficient
market, every stock is a good choice.
Answer:
TRUE
Technical analysts look at historical
prices for information to project future prices.
Answer: TRUE
The evidence suggests
technical analysts are not superior stock pickers.
Answer: TRUE
If the markets are efficient,
the optimal investment strategy will be to buy and
hold so as to
minimize transaction costs.
Answer: TRUE
2.
3.
4.
5.
6.
7.
8.
9. “Short
selling” refers to the practice of buying a stock
and holding it for only a short time before
selling it.
Answer: FALSE
In an
efficient market, abnormal returns are not
possible even using inside information.
Answer: FALSE
10. Loss aversion means
the unhappiness a person feels when he or she
suffers a monetary loss exceeds
the happiness
the same person experiences from receiving a
monetary gain of the same amount.
Answer:
TRUE
11. It is probably a good use of an
investor’s time to watch as many shows featuring
technical analysts
as possible.
Answer:
FALSE
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Essay
1.
2.
3.
4.
5.
6.
How do loss aversion, overconfidence of
investors, and social contagion affect market
efficiency?
What is a rational bubble?
How
is it possible that a firm can announce a record-
breaking loss, yet its stock price rise when the
announcement is made?
What is the optimal
investment strategy according to the efficient
market hypothesis? Why?
Explain what the
market reaction will be in an efficient market if
a firm announces a fully
anticipated filing
for bankruptcy.
Why are expectations important
in understanding how financial instruments are
valued?
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