1. Proponents of the efficient market hypothesis think technical analysts:
a. Should focus on relative strength
b. Should focus on resistance levels
c. Should focus on support levels
d. Are wasting their time

2. According to proponents of the efficient market hypothesis, the best strategy for a small investor with a portfolio worth $25,000 is probably to:
a. Perform fundamental analysis
b. Invest in individual stocks
c. Invest in derivative securities
d. Invest in mutual funds

3. Although markets may not be perfectly efficient, they are relatively efficient. An implication of this statement is:
a. Fundamental analysis based on publicly available information is likely to successfully generate abnormal profits.
b. Technical analysis is not likely to be rewarded by substantial abnormal returns.
c. As it relates to fundamental analysis, average or below average analysis of publicly available information will likely be fruitful.
d. As it relates to technical analysis and fundamental analysis, active trading strategies are likely to outperform passive portfolio management strategies.

4. Which of the following statements is false?
a. Stock returns tend to produce statistically higher returns in January than in the other 11 months of the year.
b. Average Monday returns tend to be negative, while average returns for the other four trading days tend to be positive.
c. Growth stocks have consistently outperformed value stocks.
d. Small cap stocks tend to outperform large cap stocks.

5. Which of the following characteristics is not typical of a value stock?
a. Below average P/E ratio
b. Below average M/B ratio
c. Above average dividend yield
d. None of the above

6. If an investor observes a stock that experienced a price increase before an announcement of new information, as shown in the figure below, what can he or she conclude?
a. The market is semi-strong form efficient.
b. The market is strong form efficient.
c. The market is not weak form efficient.
d. The market is not efficient in any form.

7. When investors dislike risk but are willing to undertake risk if they are compensated in the form of higher returns, this is an example of:
a. Loss aversion
b. Anchoring
c. Mental accounting
d. Risk aversion

8. Researchers have found that most of the small firm effect occurs:
a. During the spring months
b. During the summer months
c. In January

  • CreatedFebruary 25, 2015
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