Question

1)The weak form of the efficient market theory contends that Select one:

A. any publicly available information is useless in predicting future price movements.

B. past performance can help determine the general direction of future price movements.

C. past price performance is useless in predicting future price movements.

D. price movements are not random but follow a general trend over a period of time.

2)Which of the following beliefs would not preclude charting as a method of portfolio management?

Select one:

A. The market is weak-form efficient.

B. Stock prices follow recurring patterns.

C. The market is semistrong-form efficient.

D. The market is strong-form efficient.

3)If you believe in the ________ form of the EMH, you believe that stock prices reflect all publicly available information but not information that is available only to insiders.

Select one:

A. weak

B. semistrong

C. strong

D. perfect

4)Most people would readily agree that the stock market is not ________.

Select one:

A. weak-form efficient

B. efficient at all

C. semistrong-form efficient

D. strong-form efficient

5)________ is the return on a stock beyond what would be predicted from market movements alone.

Select one:

A. An abnormal return

B. A normal return

C. None of these options

D. A subliminal return

Answer 1

1) The weak form of market efficiency states that the past prices are useless in predicting the future prices. As stock prices follow a random walk.

So, the correct option is option C.

All the other options are incorrect,as stock prices follow a random walk and there is no particular trend that stock prices follow.

2) When stock prices follow a recurring pattern, then we may not preclude charting as a method of portfolio management. Weak form, semi-strong and strong form efficient markets believe that neither fundamental nor technical analysis an help predict future stock prices and returns.

So, the correct option is option B.

3) Semi-strong efficient markets believe that the stock prices reflect all the public information but investors ca benefit form any inside information which is not publicly available.

So, the correct option is option B.

4) Most people would agree that stock markets are not strong form efficient,as the investors in a strong form cannot generate abnormal returns in any case.

So, the correct option is option D.

5) Abnormal return is return above the returns that are predicted by stock movements.

So, the correct option is option A.