53.
Which of the following are investment superstars who have consistently shown superior
performance?
I) Warren Buffet
II) Phoebe Buffet
III) Peter Lynch
IV) Merrill Lynch
V) Jimmy Buffet
54.
Google has a beta of 1.0. The annualized market return yesterday was 11%, and the risk-
free rate is currently 5%. You observe that Google had an annualized return yesterday of
14%. Assuming that markets are efficient, this suggests that
55.
Music Doctors has a beta of 2.25. The annualized market return yesterday was 12%, and
the risk-free rate is currently 4%. You observe that Music Doctors had an annualized
return yesterday of 15%. Assuming that markets are efficient, this suggests that
56.
QQAG has a beta of 1.7. The annualized market return yesterday was 13%, and the risk-
free rate is currently 3%. You observe that QQAG had an annualized return yesterday of
20%. Assuming that markets are efficient, this suggests that
57.
QQAG just announced yesterday that its fourth quarter earnings will be 35% higher than
last year’s fourth quarter. You observe that QQAG had an abnormal return of -1.7%
yesterday. This suggests that
58.
LJP Corporation just announced yesterday that it would undertake an international joint
venture. You observe that LJP had an abnormal return of 3% yesterday. This suggests that
59.
Music Doctors just announced yesterday that its first quarter sales were 35% higher than
last year’s first quarter. You observe that Music Doctors had an abnormal return of -2%
yesterday. This suggests that
60.
The Food and Drug Administration (FDA) just announced yesterday that they would
approve a new cancer-fighting drug from King. You observe that King had an abnormal
return of 0% yesterday. This suggests that
61.
Your professor finds a stock-trading rule that generates excess risk-adjusted returns.
Instead of publishing the results, she keeps the trading rule to herself. This is most closely
associated with
62.
At freshman orientation, 1,500 students are asked to flip a coin 20 times. One student is
crowned the winner (tossed 20 heads). This is most closely associated with
63.
Sehun (1986) finds that the practice of monitoring insider trade disclosures, and trading
on that information, would be
64.
If you believe in the reversal effect, you should
65.
Patell and Woflson (1984) report that most of the stock price response to corporate
dividend or earnings announcements occurs within ____________ of the announcement.
11–72
66.
Del Guerico and Reuter (2013) report that the average underperformance of actively
managed mutual funds is driven largely by
Short Answer Questions
67.
Discuss the various forms of market efficiency. Include in your discussion the information
sets involved in each form and the relationships across information sets and across forms
of market efficiency. Also discuss the implications for the various forms of market
efficiency for the various types of securities’ analysts.
68.
What is an event study? It is a test of what form of market efficiency? Discuss the process
of conducting an event study, including the best variable(s) to observe as tests of market
efficiency.
69.
Discuss the small firm effect, the neglected firm effect, and the January effect, the tax
effect and how the four effects may be related.
70.
Why might the degree of market efficiency differ across various markets? State three
reasons why this might occur, and explain each reason briefly.
71.
With regard to market efficiency, what is meant by the term “anomaly”? Give three
examples of market anomalies and explain why each is considered to be an anomaly.
