Question

MCQs:

Capital markets research focuses on the relationship between:

1. Accounting information and standards setting.
2. Accounting information and capital markets.
3. Capital markets and the economy.
4. Standards setting and accounting information.

Which of the following is NOT a conclusion of capital markets research?

1. Accounting information is not used by investors.
2. Accounting earnings are poor measures of relevant events that are incorporated into share price.
3. Investors react more quickly to bad news than to good.
4. Forecasts of future performance are core to valuation.

Value relevance studies attempt to assess the role of which qualitative characteristic of the Conceptual Framework?

1. Relevance and faithful representation.
2. Relevance.
3. Faithful representation.
4. None of the above.

The kind of study used to examine how quickly accounting measures capture changes in the information that is reflected in share prices over a given period is:

1. A qualitative study.
2. An events study.
3. An association study.
4. A normative study.

Information perspective studies have shown us that when compared to sophisticated investors, unsophisticated investors:

1. Underreact to good new and overreact to bad news.
2. Overreact to good news and underreact to bad news.
3. Overreact to news, both good and bad.
4. Are little different to their reactions.

Answer 1

Question - (1)

Answer -

Capital markets research focuses on the relationship between accounting information and capital markets.

Hence, Option - (b) is Correct.

.

Question - (2)

Answer -

Accounting information is not used by investors is NOT a conclusion of capital markets research.

Hence, Option - (a) is Correct.

.

Question - (3)

Answer -

Value relevance studies attempt to assess the role of relevance and faithful representation.

Hence, Option - (a) is Correct.

.

Question - (4)

Answer -

The kind of study used to examine how quickly accounting measures capture changes in the information that is reflected in share prices over a given period is an association study.

Hence, Option - (c) is Correct.

.

Question - (5)

Answer -

Information perspective studies have shown us that when compared to sophisticated investors, unsophisticated investors overreact to good news and underreact to bad news.

Hence, Option - (b) is Correct.