1. Which of the following beliefs would
not
preclude charting as a method of portfolio
management?
2. In a 1953 study of stock prices, Maurice Kendall found that ________.
3. The weak form of the EMH states that ________ must be reflected in the current stock
price.
4. The semistrong form of the EMH states that ________ must be reflected in the current
stock price.
5. The strong form of the EMH states that ________ must be reflected in the current stock
price.
6. Random price movements indicate ________.
7. When the market risk premium rises, stock prices will ________.
8. The small-firm-in-January effect is strongest ________.
9. Evidence suggests that there may be _______ momentum and ________ reversal patterns
in stock price behavior.
10. Proponents of the EMH typically advocate __________.
11. Stock prices that are stable over time _______.
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.
13. Which of the following is
not
a method employed by followers of technical analysis?
14. Which of the following is
not
a method employed by fundamental analysts?
15. The primary objective of fundamental analysis is to identify __________.
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.
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.
18. Most of the stock price response to a corporate earnings or dividend announcement
occurs within ________________.
19. __________ is the return on a stock beyond what would be predicted from market
movements alone.
20. You believe that stock prices reflect all information that can be derived by examining
market trading data such as the history of past stock prices, trading volume, or short interest, but
you do not believe stock prices reflect all publicly available and inside information. You are a
proponent of the ____________ form of the EMH.
21. You are an investment manager who is currently managing assets worth $6 billion. You
believe that active management of your fund could generate an additional one-tenth of 1% return
on the portfolio. If you want to make sure your active strategy adds value, how much can you
spend on security analysis?
22. A mutual fund that attempts to hold quantities of shares in proportion to their
representation in the market is called a __________ fund.
23. Choosing stocks by searching for predictable patterns in stock prices is called ________.
24. Which of the following is
not
an issue that is central to the debate regarding market
efficiency?
25. Most people would readily agree that the stock market is
not
_________.
26. Small firms have tended to earn abnormal returns primarily in __________.
27. Fama and French have suggested that many market anomalies can be explained as
manifestations of ____________.
28. Proponents of the EMH think technical analysts __________.
29. Evidence supporting semistrong-form market efficiency suggests that investors should
_________________________.
30. “Buy a stock if its price moves up by 2% more than the Dow Average” is an example of a
_________________.
31. Jaffe found that stock prices __________ after insiders intensively bought shares and
__________ after insiders intensively sold shares.
32. In a 1988 study, Fama and French found that the return on the aggregate stock market
was __________ when the dividend yield was higher.
33. In their 2010 study, Fama and French used a four-factor model to analyze excess returns
on equity mutual funds. They found that the funds ______.
34. Joe bought a stock at $57 per share. The price promptly fell to $55. Joe held on to the
stock until it again reached $57, and then he sold it once he had eliminated his loss. If other
investors do the same to establish a trading pattern, this would contradict _______.
35. According to 1968 research by Ball and Brown, securities markets fully adjust to earnings
announcements _______.
36. When stock returns exhibit positive serial correlation, this means that __________ returns
tend to follow ___________ returns.
37. Basu found that firms with high P/E ratios __________.
38. Fundamental analysis is likely to yield best results for _______.
39. You are looking to invest in one of three stocks. All other things being equal, Stock A has
high expected earnings growth, stock B has only modest expected earnings growth, and stock C is
expected to generate poor earnings growth. According to LaPorta’s 1996 study, which stock is
likely to generate the greatest alpha for you?
40. You believe that you can earn 2% more on your portfolio if you engage in full-time stock
research. However, the additional trading costs and tax liability from active management will cost
you about .5%. You have an $800,000 stock portfolio. What is the most you can afford to spend on
your research?
41. Even if the markets are efficient, professional portfolio management is still important
because it provides investors with:
I. Low-cost diversification
II. A portfolio with a specified risk level
III. Better risk-adjusted returns than an index
42. Banz found that, on average, the risk-adjusted returns of small firms __________.
43. If the U.S. capital markets are not informationally efficient, ______.
44. “Active investment management may at times generate additional returns of about .1%.
However, the standard deviation of the typical well-diversified portfolio is about 20%, so it is very
difficult to statistically identify any increase in performance.” Even if true, this statement is an
example of the _________ problem in deciding how efficient the markets are.
45. DeBondt and Thaler (1985) found that the poorest-performing stocks in one time period
experienced __________ performance in the following period and that the best-performing stocks
in one time period experienced __________ performance in the following time period.