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46. J. M. Keyes put all his money in one stock, and the stock doubled in value in a matter of
months. He did this three times in a row with three different stocks. J. M. got his picture on the
front page of the
Wall Street Journal.
However, the paper never mentioned the thousands of
investors who made similar bets on other stocks and lost most of their money. This is an example
of the ________ problem in deciding how efficient the markets are.
47. Most tests of semistrong efficiency are _________.
48. The _________ effect may explain much of the small-firm anomaly.
I. January
II. neglected
III. liquidity
49. The effect of liquidity on stock returns might be related to:
I. The small-firm effect
II The book-to-market effect
III The neglected-firm effect
IV. The P/E effect
50. The broadest information set is included in the _____.
51. The Fama and French evidence that high book-to-market firms outperform low book-to-
market firms even after adjusting for beta means that _________.
52. According to results by Seyhun, __________.
53. If the daily returns on the stock market are normally distributed with a mean of .05% and a
standard deviation of 1%, the probability that the stock market would have a return of -23% or
worse on one particular day (as it did on Black Monday) is approximately __________.
54. According to the semistrong form of the efficient markets hypothesis, ____________.
55. The term
random walk
is used in investments to refer to ______________.
56. Among the important characteristics of market efficiency is (are) that:
I. There are no arbitrage opportunities.
II. Security prices react quickly to new information.
III. Active trading strategies will not consistently outperform passive strategies.
57. Stock market analysts have tended to be ___________ in their recommendations to
investors.
58. Assume that a company announces unexpectedly high earnings in a particular quarter. In
an efficient market one might expect _____________.
59.
Market anomaly
refers to _______.
60. Which of the following contradicts the proposition that the stock market is weakly
efficient?
61. Which of the following would violate the efficient market hypothesis?
62. Which of the following stock price observations would appear to contradict the weak form
of the efficient market hypothesis?
63. The semistrong form of the efficient market hypothesis implies that ____________ generate
abnormal returns and ____________ generate abnormal returns.
64. An implication of the efficient market hypothesis is that __________.
65. One type of passive portfolio management is ________.
66. The four-factor model used to construct performance benchmarks for mutual funds uses
the three Fama and French factors and one additional factor related to _________.
67. Value stocks may provide investors with better returns than growth stocks if:
I. Value stocks are out of favor with investors.
II. Prices of growth stocks include premiums for overly optimistic growth levels.
III. Value stocks are likely to generate positive-earnings surprises.
68. Value stocks usually exhibit ______ price-to-book ratios and ______ price-to-earnings
ratios.
69. Growth stocks usually exhibit ______ price-to-book ratios and ______ price-to-earnings
ratios.
70. A day trade with an average stock holding period of under 8 minutes might be most closely
associated with which trading philosophy?
71. A technical analyst is most likely to be affiliated with which investment philosophy?
72. Someone who invests in the Vanguard Index 500 mutual fund could most accurately be
described as using which approach?
73. Evidence by Blake, Elton, and Gruber indicates that, on average, actively managed bond
funds ______.
74. Insiders are able to profitably trade and earn abnormal returns prior to the announcement
of positive news. This is a violation of which form of efficiency?
75. In an efficient market and for an investor who believes in a passive approach to investing,
what is the primary duty of a portfolio manager?
76. Which of the following is
not
a topic related to the debate over market efficiency?
77. Which Fidelity Magellan portfolio manager is often referenced as an exception to the
general conclusion of efficient markets?
78. The tendency of poorly performing stocks and well-performing stocks in one period to
continue their performance into the next period is called the ________________.
79. Which of the following is
not
a concept related to explaining abnormal excess stock
returns?
80. The lack of adequate trading volume in stock that may ultimately lead to its ability to
produce excess returns is referred to as the ____________________.
81. Fundamental analysis determines that the price of a firm's stock is too low, given its
intrinsic value. The information used in the analysis is available to all market participants, yet the
price does not seem to react. The stock does not trade on a major exchange. What concept might
explain the ability to produce excess returns on this stock?
82. When testing mutual fund performance over time, one must be careful of ___________,
which means that a certain percentage of poorer-performing funds fail over time, making the
performance of remaining funds seem more consistent over time.
83. Most evidence indicates that U.S. stock markets are _______________________.
84. Which of the following statements is (are) correct?
85. According to Markowitz and other proponents of modern portfolio theory, which of the
following activities would
not
be expected to produce any benefits?
86. According to results by Seyhun, the main reason that investors cannot earn excess returns
by following inside trades after they become public is that ______________.
