Test Bank for Essentials Of Investments 12th Edition Zvi
Bodie, Alex Kane, Alan J. Marcus
Which of the following beliefs would not preclude charting as a method of portfolio
management?
A. The market is strong-form efficient.
B. The market is semistrong-form efficient.
C. The market is weak-form efficient.
D. Stock prices follow recurring patterns. - ANSWER D. Stock prices follow recurring
patterns.
2. In a 1953 study of stock prices, Maurice Kendall found that ________.
A. there were no predictable patterns in stock prices
B. stock prices exhibited strong serial autocorrelation
C. day-to-day stock prices followed consistent trends
D. fundamental analysis could be used to generate abnormal returns - ANSWER A.
there were no predictable patterns in stock prices
3. The weak form of the EMH states that ________ must be reflected in the current
stock price.
A. all past information, including security price and volume data
B. all publicly available information
C. all information, including inside information
D. all costless information - ANSWER A. all past information, including security price
and volume data
4. The semistrong form of the EMH states that ________ must be reflected in the
current stock price.
A. all security price and volume data
B. all publicly available information
C. all information, including inside information
,D. all costless information - ANSWER B. all publicly available information
5. The strong form of the EMH states that ________ must be reflected in the current
stock price.
A. all security price and volume data
B. all publicly available information
C. all information, including inside information
D. all costless information - ANSWER C. all information, including inside information
6. Random price movements indicate ________.
A. irrational markets
B. that prices cannot equal fundamental values
C. that technical analysis to uncover trends can be quite useful
D. that markets are functioning efficiently - ANSWER D. that markets are functioning
efficiently
7. When the market risk premium rises, stock prices will ________.
A. rise
B. fall
C. recover
D. have excess volatility - ANSWER B. fall
8. The small-firm effect is strongest in which month?
A. January
B. June
C. July
D. December - ANSWER A. January
9. Evidence suggests that there may be _______ momentum and ________ reversal
patterns in stock price behavior.
A. short-run; short-run
B. long-run; long-run
,C. long-run; short-run
D. short-run; negligible - ANSWER A. short-run; short-run
10. Proponents of the EMH typically advocate __________.
A. a conservative investment strategy
B. a liberal investment strategy
C. a passive investment strategy
D. an aggressive investment strategy - ANSWER C. a passive investment strategy
11. Stock prices that are stable over time _______.
A. indicate that prices are useful indicators of true economic value
B. indicate that the market is not incorporating new information into current stock
prices
C. ensure that an economy allocates its resources efficiently
D. indicates that returns follow a random-walk process - ANSWER B. indicate that
the market is not incorporating new information into current stock prices
12. The tendency when the ______ performing stocks in one period are the best
performers in the next and the current ________ performers are lagging the market
later is called the reversal effect.
A. worst; best
B. worst; worst
C. best; worst
D. best; best - ANSWER A. worst; best
13. Which of the following is not a method employed by followers of technical
analysis?
A. charting
B. relative strength analysis
C. earnings forecasting
D. trading around support and resistance levels - ANSWER C. earnings forecasting
14. Which of the following is not a method employed by fundamental analysts?
A. analyzing the Fed's next interest rate move
B. relative strength analysis
, C. earnings forecasting
D. estimating the economic growth rate - ANSWER B. relative strength analysis
15. The primary objective of fundamental analysis is to identify __________.
A. well-run firms
B. poorly run firms
C. mispriced stocks
D. high P/E stocks - ANSWER C. mispriced stocks
16. 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.
A. semistrong
B. strong
C. weak
D. perfect - ANSWER A. semistrong
17. If you believe in the __________ form of the EMH, you believe that stock prices
reflect all relevant information, including information that is available only to insiders.
A. semistrong
B. strong
C. weak
D. perfect - ANSWER B. strong
18. Most of the stock price response to a corporate earnings or dividend
announcement occurs within ________________.
A. about 30 seconds
B. about 10 minutes
C. 6 months
D. 2 years - ANSWER B. about 10 minutes
19. __________ is the return on a stock beyond what would be predicted from
market movements alone.
Bodie, Alex Kane, Alan J. Marcus
Which of the following beliefs would not preclude charting as a method of portfolio
management?
A. The market is strong-form efficient.
B. The market is semistrong-form efficient.
C. The market is weak-form efficient.
D. Stock prices follow recurring patterns. - ANSWER D. Stock prices follow recurring
patterns.
2. In a 1953 study of stock prices, Maurice Kendall found that ________.
A. there were no predictable patterns in stock prices
B. stock prices exhibited strong serial autocorrelation
C. day-to-day stock prices followed consistent trends
D. fundamental analysis could be used to generate abnormal returns - ANSWER A.
there were no predictable patterns in stock prices
3. The weak form of the EMH states that ________ must be reflected in the current
stock price.
A. all past information, including security price and volume data
B. all publicly available information
C. all information, including inside information
D. all costless information - ANSWER A. all past information, including security price
and volume data
4. The semistrong form of the EMH states that ________ must be reflected in the
current stock price.
A. all security price and volume data
B. all publicly available information
C. all information, including inside information
,D. all costless information - ANSWER B. all publicly available information
5. The strong form of the EMH states that ________ must be reflected in the current
stock price.
A. all security price and volume data
B. all publicly available information
C. all information, including inside information
D. all costless information - ANSWER C. all information, including inside information
6. Random price movements indicate ________.
A. irrational markets
B. that prices cannot equal fundamental values
C. that technical analysis to uncover trends can be quite useful
D. that markets are functioning efficiently - ANSWER D. that markets are functioning
efficiently
7. When the market risk premium rises, stock prices will ________.
A. rise
B. fall
C. recover
D. have excess volatility - ANSWER B. fall
8. The small-firm effect is strongest in which month?
A. January
B. June
C. July
D. December - ANSWER A. January
9. Evidence suggests that there may be _______ momentum and ________ reversal
patterns in stock price behavior.
A. short-run; short-run
B. long-run; long-run
,C. long-run; short-run
D. short-run; negligible - ANSWER A. short-run; short-run
10. Proponents of the EMH typically advocate __________.
A. a conservative investment strategy
B. a liberal investment strategy
C. a passive investment strategy
D. an aggressive investment strategy - ANSWER C. a passive investment strategy
11. Stock prices that are stable over time _______.
A. indicate that prices are useful indicators of true economic value
B. indicate that the market is not incorporating new information into current stock
prices
C. ensure that an economy allocates its resources efficiently
D. indicates that returns follow a random-walk process - ANSWER B. indicate that
the market is not incorporating new information into current stock prices
12. The tendency when the ______ performing stocks in one period are the best
performers in the next and the current ________ performers are lagging the market
later is called the reversal effect.
A. worst; best
B. worst; worst
C. best; worst
D. best; best - ANSWER A. worst; best
13. Which of the following is not a method employed by followers of technical
analysis?
A. charting
B. relative strength analysis
C. earnings forecasting
D. trading around support and resistance levels - ANSWER C. earnings forecasting
14. Which of the following is not a method employed by fundamental analysts?
A. analyzing the Fed's next interest rate move
B. relative strength analysis
, C. earnings forecasting
D. estimating the economic growth rate - ANSWER B. relative strength analysis
15. The primary objective of fundamental analysis is to identify __________.
A. well-run firms
B. poorly run firms
C. mispriced stocks
D. high P/E stocks - ANSWER C. mispriced stocks
16. 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.
A. semistrong
B. strong
C. weak
D. perfect - ANSWER A. semistrong
17. If you believe in the __________ form of the EMH, you believe that stock prices
reflect all relevant information, including information that is available only to insiders.
A. semistrong
B. strong
C. weak
D. perfect - ANSWER B. strong
18. Most of the stock price response to a corporate earnings or dividend
announcement occurs within ________________.
A. about 30 seconds
B. about 10 minutes
C. 6 months
D. 2 years - ANSWER B. about 10 minutes
19. __________ is the return on a stock beyond what would be predicted from
market movements alone.
